SEC Company Response from BLACK HILLS (BKH) — Jul 11, 2013
BLACK HILLS CORP /SD/ (BKH) (CIK 0001130464)
Date: July 11, 2013 · CIK: 0001130464 · Accession: 0001130464-13-000168
AI Filing Summary & Sentiment
Reasoning
Letter
Division of Corporation Finance United States Securities and Exchange Commission Black Hills Corporation (the “Company”, “we”, “our” or “us”) Form 10-K for Fiscal Year Ended December 31, 2012 Filed February 25, 2013 File No. 1-31303
Re:
Dear Mr. Allegretto:
The purpose of this letter is to respond to your comments as set forth in your letter of June 13, 2013. The headings used herein are the same as those set forth in your letter. For ease of reference, we have set forth your comment before each response.
We have carefully considered your comments and our following responses provide the details of how we intend to comply with your comments by enhancing and, in some respects, clarifying our disclosures. In some limited cases where we believe further revision is unnecessary, we have provided an explanation.
In connection with our response to your comments, we also acknowledge the following:
•
The Company is responsible for the adequacy and accuracy of the disclosure in the filing;
•
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
•
The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
Summary of Oil and Gas Reserve Data, page 36
Proved Reserves, page 38
Comment No. 1:
In comparing the disclosure on pages 38 and 174 to the reserves report filed as Exhibit 99, it appears that you have included the net quantities classified as proved developed non-producing in the Exhibit as proved undeveloped reserves on pages 38 and 174. Please revise or advise.
Company's Response:
We agree with the Staff's comment. We included in proved undeveloped reserves within our disclosures on pages 38 and 174 2,090 MMcfe that were classified as proved developed non-producing in the reserves report filed as Exhibit 99. The net quantities involved represent 2.6% of total reserves at December 31, 2012, which we believe to be immaterial to the users of our financial statements. For future filings, beginning with our 2013 Form 10-K, we will revise our presentation of reserves in the Form 10-K to be consistent with the classification in Exhibit 99.
Jim Allegretto
U.S. Securities and Exchange Commission
July 11, 2013
Page 2
Comment No. 2:
Revise the tables on pages 38 through 40 and elsewhere on pages 86 and 174 through 175 to present natural gas liquid reserves. See FASB ASC paragraph 932-235-50-4 regarding the separate disclosure of reserve quantify information for natural gas liquids. In that regard, the staff views natural gas liquids as a separate product type under Item 1202(a)(1) and (2) of Regulation S-K.
Company's Response:
We acknowledge this and other comments of the Staff regarding enhancements to our disclosures surrounding natural gas liquids (NGLs). In applying the requirements of Item 1202 and FASB ASC paragraph 932-235-50-4 to our disclosure of reserves, we note that Item 1202(a)(4) and FASB ASC paragraph 932-235-50-4 require separate disclosure of reserves for the product types listed if material. We agree with the Staff view that NGLs are a separate product type; however, we do not view our NGL reserve quantities as material to our overall reserves. Accordingly, we have not reflected NGLs in our proved liquid reserve estimates as they have been an immaterial portion of our reserves.
In determining whether or not to present NGL reserve quantities separately, we also considered the guidance set forth in ASC 932-235-50-6B regarding (a) considering all facts and circumstances and not solely the quantity of reserves and (b) the 15% quantitative significance threshold. Our evaluation of the significance of our NGL reserves is based on all relevant circumstances and not solely on a quantitative reserve basis. We further referred to the guidance set forth in ASC 932-235-20, which defines "significant oil and gas producing activities". We evaluated the significance of our NGL reserves (i) relative to our total oil and gas activity, and (ii) relative to the total consolidated financial statement amounts of our segment, as outlined in the ASC 932-235-20 definition.
Our NGL proved reserve quantities represented less than 5% of our total proved reserves as of December 31, 2012. For the year ended December 31, 2012, our Oil & Gas segment revenue was approximately 6.7% of Black Hills Corporation consolidated revenue, and NGLs were 4.0% of our crude oil and natural gas production, 3.4% of our total Oil and Gas segment revenue, and 0.2% of our consolidated revenue.
We will continue to monitor our NGLs and make the separate disclosure if they become material.
Production Volumes, page 41
Comment No. 3:
We note your disclosure with respect to the net quantities of natural gas liquids (NGLs) production is presented variously as equivalent gas volumes on page 41, as production excluding NGLs on pages 39 through 40 and 174 and as separate quantities of NGLs on page 85. As Item 1204(a) of Regulation S-K requires disclosure by final product sold of oil, gas, and other products, please advise or revise your disclosure relating to NGL production volumes to be on a consistent basis throughout your filing.
Company's Response:
We agree with the Staff's comment, to be consistent in our disclosure we should show NGL production volumes separately, rather than including those volumes with natural gas where we have done so. We believe this additional separate disclosure of our NGL production volumes in past filings is immaterial to the users of our financial statements. For future filings, beginning with our 2013 Form 10-K, we will show NGL production volumes separately in all disclosure of production volumes.
We include supplementally in our response to Comment No. 4 below a revised presentation of production volumes for the years ended December 31, 2012 and 2011.
Jim Allegretto
U.S. Securities and Exchange Commission
July 11, 2013
Page 3
Comment No. 4:
Please advise or expand your disclosure of production on page 41 to comply with the requirements set forth in Item 1204(a) of Regulation S-K to provide disclosure for each field that contains 15% or more of the Company's total proved reserves.
Company's Response:
We agree with the Staff's comment as Item 1204(a) of Regulation S-K requires disclosure of production by geographical area and for each country and field that contains 15% or more of our total proved reserves. In response to the Staff's comment, in our future filings beginning with our 2013 Form 10-K, we will clarify our disclosure to include disclosure of production by each field that contains 15% or more of our total proved reserves. We include supplementally the following tables to show this disclosure for the years ended December 31, 2012 and 2011:
Production Volumes
Year ended Dec. 31, 2012
Location (Basin)
Field
Oil (in Bbl)
Natural Gas (Mcfe)
NGLs (Gallons)
Total (Mcfe)
San Juan
East Blanco
1,423
3,584,746
—
3,593,284
San Juan
All others
—
1,338,843
—
1,338,843
Piceance
Piceance
—
1,716,588
244,339
1,751,494
Powder River
Finn Shirley
202,698
441,165
2,742,039
2,049,073
Powder River
All others
15,757
4,667
—
99,209
Williston
Bakken
337,579
404,466
159,543
2,452,732
All other properties
Various
2,514
1,195,716
339,593
1,259,313
Total Volume
559,971
8,686,191
3,485,514
12,543,948
Production Volumes
Year ended Dec. 31, 2011
Location (Basin)
Field
Oil (in Bbl)
Natural Gas (Mcfe)
NGLs (Gallons)
Total (Mcfe)
San Juan
East Blanco
1,746
4,225,027
—
4,235,503
San Juan
All others
—
837,635
—
837,635
Piceance
Piceance
—
1,077,040
240,667
1,111,421
Powder River
Finn Shirley
248,089
512,100
2,983,700
2,426,877
Powder River
All others
16,269
4,230
—
101,844
Williston
Bakken
181,580
167,367
39,079
1,262,429
All other properties
Various
4,139
1,703,021
411,368
1,786,622
Total Volume
451,823
8,526,420
3,674,814
11,762,331
Jim Allegretto
U.S. Securities and Exchange Commission
July 11, 2013
Page 4
Other Information, page 42
Comment No. 5:
We note your disclosure on page 85 of the average price received per gallon of natural gas liquids (NGLs) sold. Please advise or expand your disclosure of the average wellhead prices used in the determination of the reserves provided on page 42 to include the price for NGLs.
Company's Response:
For the reasons set forth in our response above to Staff Comment No. 2, we have not reflected NGLs in our proved liquid reserves. As a result, we have not used the average wellhead prices of NGLs in the determination of our reserves.
We will continue to monitor our NGLs and make the separate disclosure if they become material.
Oil and Gas Reserves (Unaudited), page 173
Reserves, page 173
Comment No. 6:
We note the following from your disclosure:
•
On page 175 you disclose that you invested $5.7 million to develop PUD locations in 2012; however, the table on that page indicates $4.9 million of future development costs were incurred for PUD locations.
•
On page 175 your disclosure is limited to the 3 gross PUD locations drilled in the Williston Basin during 2012; however, the table on page 43 indicates that in addition to wells drilled in the Williston Basin during 2012, you also drilled productive development and exploratory wells in the Powder River and Piceance Basins.
•
On page 175 your disclosure is limited to the 1.4 Bcfe of proved reserves that you converted or added in the Williston basin; however, the table on page 39 discloses your total 2012 additions from extensions and discoveries were 5.6 Bcfe.
Please advise or expand you disclosure to reconcile the difference in the capital amounts invested and the net reserve additions and changes relating to your drilling activities during 2012 as required under Item 1203 of Regulation S-K and FASB ASC paragraph 932-235-50-5.
Company's Response:
•
Staff Comment: On page 175 you disclose that you invested $5.7 million to develop PUD locations in 2012; however, the table on that page indicates $4.9 million of future development costs were incurred for PUD locations.
Company's Response: The $5.7 million and $4.9 million are not intended to be compared. The $5.7 million represents the amounts invested to develop three Williston Basin PUD locations in our remaining Williston Basin assets. The $4.9 million represents future development costs included in the table on page 175 that have not yet been incurred as of December 31, 2012. These are costs that we would expect to incur in the future in connection with the development of these Williston Basin reserves.
For future filings, beginning with our 2013 Form 10-K, we will clarify the wording in our presentation by separating the information into two different bullets, one for historical spending and the other for future development costs, to read as follows:
•
During 2012 we invested $5.7 million to develop three Williston Basin PUD locations in our remaining Williston Basin assets.
•
At December 31, 2012, our proved reserves, PUD locations and future development costs are reflected in the following table.
Jim Allegretto
U.S. Securities and Exchange Commission
July 11, 2013
Page 5
•
Staff Comment: On page 175 your disclosure is limited to the 3 gross PUD locations drilled in the Williston Basin during 2012; however, the table on page 43 indicates that in addition to wells drilled in the Williston Basin during 2012, you also drilled productive development and exploratory wells in the Powder River and Piceance Basins.
•
Staff Comment: On page 175 your disclosure is limited to the 1.4 Bcfe of proved reserves that you converted or added in the Williston basin; however, the table on page 39 discloses your total 2012 additions from extensions and discoveries were 5.6 Bcfe.
Company's Response: Final Release No. 33-8995, which generated Item 1203 of Regulation S-K, requires disclosure in narrative form of information relating to proved undeveloped reserves while FASB ASC paragraph 932-235-50-5 requires disclosure of changes in net quantities of an entity's proved reserves. In applying the requirements of Item 1203, we included only information related to proved undeveloped reserves required under this Item. In applying the requirements of FASB ASC paragraph 932-235-50-5, we included information related to all of our proved reserves - developed and undeveloped - as required under this ASC. Because our reserve report reflects year over year results, development and exploratory wells drilled during a current year may not have been booked as proved undeveloped locations in the previous year's reserve report.
In 2012, the only December 31, 2011 proved undeveloped reserves locations in which we invested were the 3 gross PUD locations drilled in the Williston Basin noted in our disclosure on page 175. Drilling activity in 2012 created locations in the Powder River and Piceance Basins classified as proved undeveloped that were also developed as proved developed producing during the year. These Powder River and Piceance Basin productive development and exploratory wells were not classified as proved undeveloped at either December 31, 2012 or 2011; therefore, we did not include these in our disclosure of proved undeveloped reserves on page 175.
The narrative in the footnote on page 174 under the reserves tables references total reserve additions of 5.6 Bcfe, in agreement with the total 2012 additions from extensions and discoveries included in the table on page 39. The narrative and table found later in that footnote on the bottom of page 174 and at the top of page 175 were provided to reflect only the activity associated with proved undeveloped reserves that were recorded as of December 31, 2011 and December 31, 2012, in accordance with the requirements of Item 1203. The 1.4 Bcfe shown in that table is the portion of overall reserve additions from extensions and discoveries that was attributable to those locations classified as proved undeveloped at December 31, 2011 and 2012.
In future filings, we will include additional headings in the footnote to more clearly delineate the information that is related to proved undeveloped reserves only.
Standardized Measure of Discounted Future Net Cash Flows, page 176
Comment No. 7:
Your disclosure of the standardized measure of discounted future net cash flows for each of the periods presented on page 176 does not appear to include the cost associated with the abandonment of your oil and gas assets as part of the future development costs. Please tell us how you have considered the inclusion of such costs in the preparation of the standardized measure relating to your proved oil and gas reserve quantities. Refer to the guidance provided by the Division of Corporation Finance at http://www.sec.gov/divisions/corpfin/guidance/oilgasletter.htm.
Jim Allegretto
U.S. Securities and Exchange Commission
July 11, 2013
Page 6
Company's Response:
We agree with the Staff's comment. We did not include the cost associated with the abandonment of oil and gas assets as part of the future development costs. We do not view these costs as material to the presentation of this estimate or to the users of our financial statements. Including the cost associated with the abandonment of oil and gas assets as part of the future development costs reduces the standardized measure of discounted future net cash flows by 4.1% at December 31, 2012. As reported, our stan
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CORRESP 1 filename1.htm SEC Comment Letter 071113 July 11, 2013 Jim Allegretto Senior Assistant Chief Accountant Division of Corporation Finance United States Securities and Exchange Commission Washington, D.C. 20549 Re: Black Hills Corporation (the “Company”, “we”, “our” or “us”) Form 10-K for Fiscal Year Ended December 31, 2012 Filed February 25, 2013 File No. 1-31303 Dear Mr. Allegretto: The purpose of this letter is to respond to your comments as set forth in your letter of June 13, 2013. The headings used herein are the same as those set forth in your letter. For ease of reference, we have set forth your comment before each response. We have carefully considered your comments and our following responses provide the details of how we intend to comply with your comments by enhancing and, in some respects, clarifying our disclosures. In some limited cases where we believe further revision is unnecessary, we have provided an explanation. In connection with our response to your comments, we also acknowledge the following: • The Company is responsible for the adequacy and accuracy of the disclosure in the filing; • Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and • The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012 Summary of Oil and Gas Reserve Data, page 36 Proved Reserves, page 38 Comment No. 1: In comparing the disclosure on pages 38 and 174 to the reserves report filed as Exhibit 99, it appears that you have included the net quantities classified as proved developed non-producing in the Exhibit as proved undeveloped reserves on pages 38 and 174. Please revise or advise. Company's Response: We agree with the Staff's comment. We included in proved undeveloped reserves within our disclosures on pages 38 and 174 2,090 MMcfe that were classified as proved developed non-producing in the reserves report filed as Exhibit 99. The net quantities involved represent 2.6% of total reserves at December 31, 2012, which we believe to be immaterial to the users of our financial statements. For future filings, beginning with our 2013 Form 10-K, we will revise our presentation of reserves in the Form 10-K to be consistent with the classification in Exhibit 99. Jim Allegretto U.S. Securities and Exchange Commission July 11, 2013 Page 2 Comment No. 2: Revise the tables on pages 38 through 40 and elsewhere on pages 86 and 174 through 175 to present natural gas liquid reserves. See FASB ASC paragraph 932-235-50-4 regarding the separate disclosure of reserve quantify information for natural gas liquids. In that regard, the staff views natural gas liquids as a separate product type under Item 1202(a)(1) and (2) of Regulation S-K. Company's Response: We acknowledge this and other comments of the Staff regarding enhancements to our disclosures surrounding natural gas liquids (NGLs). In applying the requirements of Item 1202 and FASB ASC paragraph 932-235-50-4 to our disclosure of reserves, we note that Item 1202(a)(4) and FASB ASC paragraph 932-235-50-4 require separate disclosure of reserves for the product types listed if material. We agree with the Staff view that NGLs are a separate product type; however, we do not view our NGL reserve quantities as material to our overall reserves. Accordingly, we have not reflected NGLs in our proved liquid reserve estimates as they have been an immaterial portion of our reserves. In determining whether or not to present NGL reserve quantities separately, we also considered the guidance set forth in ASC 932-235-50-6B regarding (a) considering all facts and circumstances and not solely the quantity of reserves and (b) the 15% quantitative significance threshold. Our evaluation of the significance of our NGL reserves is based on all relevant circumstances and not solely on a quantitative reserve basis. We further referred to the guidance set forth in ASC 932-235-20, which defines "significant oil and gas producing activities". We evaluated the significance of our NGL reserves (i) relative to our total oil and gas activity, and (ii) relative to the total consolidated financial statement amounts of our segment, as outlined in the ASC 932-235-20 definition. Our NGL proved reserve quantities represented less than 5% of our total proved reserves as of December 31, 2012. For the year ended December 31, 2012, our Oil & Gas segment revenue was approximately 6.7% of Black Hills Corporation consolidated revenue, and NGLs were 4.0% of our crude oil and natural gas production, 3.4% of our total Oil and Gas segment revenue, and 0.2% of our consolidated revenue. We will continue to monitor our NGLs and make the separate disclosure if they become material. Production Volumes, page 41 Comment No. 3: We note your disclosure with respect to the net quantities of natural gas liquids (NGLs) production is presented variously as equivalent gas volumes on page 41, as production excluding NGLs on pages 39 through 40 and 174 and as separate quantities of NGLs on page 85. As Item 1204(a) of Regulation S-K requires disclosure by final product sold of oil, gas, and other products, please advise or revise your disclosure relating to NGL production volumes to be on a consistent basis throughout your filing. Company's Response: We agree with the Staff's comment, to be consistent in our disclosure we should show NGL production volumes separately, rather than including those volumes with natural gas where we have done so. We believe this additional separate disclosure of our NGL production volumes in past filings is immaterial to the users of our financial statements. For future filings, beginning with our 2013 Form 10-K, we will show NGL production volumes separately in all disclosure of production volumes. We include supplementally in our response to Comment No. 4 below a revised presentation of production volumes for the years ended December 31, 2012 and 2011. Jim Allegretto U.S. Securities and Exchange Commission July 11, 2013 Page 3 Comment No. 4: Please advise or expand your disclosure of production on page 41 to comply with the requirements set forth in Item 1204(a) of Regulation S-K to provide disclosure for each field that contains 15% or more of the Company's total proved reserves. Company's Response: We agree with the Staff's comment as Item 1204(a) of Regulation S-K requires disclosure of production by geographical area and for each country and field that contains 15% or more of our total proved reserves. In response to the Staff's comment, in our future filings beginning with our 2013 Form 10-K, we will clarify our disclosure to include disclosure of production by each field that contains 15% or more of our total proved reserves. We include supplementally the following tables to show this disclosure for the years ended December 31, 2012 and 2011: Production Volumes Year ended Dec. 31, 2012 Location (Basin) Field Oil (in Bbl) Natural Gas (Mcfe) NGLs (Gallons) Total (Mcfe) San Juan East Blanco 1,423 3,584,746 — 3,593,284 San Juan All others — 1,338,843 — 1,338,843 Piceance Piceance — 1,716,588 244,339 1,751,494 Powder River Finn Shirley 202,698 441,165 2,742,039 2,049,073 Powder River All others 15,757 4,667 — 99,209 Williston Bakken 337,579 404,466 159,543 2,452,732 All other properties Various 2,514 1,195,716 339,593 1,259,313 Total Volume 559,971 8,686,191 3,485,514 12,543,948 Production Volumes Year ended Dec. 31, 2011 Location (Basin) Field Oil (in Bbl) Natural Gas (Mcfe) NGLs (Gallons) Total (Mcfe) San Juan East Blanco 1,746 4,225,027 — 4,235,503 San Juan All others — 837,635 — 837,635 Piceance Piceance — 1,077,040 240,667 1,111,421 Powder River Finn Shirley 248,089 512,100 2,983,700 2,426,877 Powder River All others 16,269 4,230 — 101,844 Williston Bakken 181,580 167,367 39,079 1,262,429 All other properties Various 4,139 1,703,021 411,368 1,786,622 Total Volume 451,823 8,526,420 3,674,814 11,762,331 Jim Allegretto U.S. Securities and Exchange Commission July 11, 2013 Page 4 Other Information, page 42 Comment No. 5: We note your disclosure on page 85 of the average price received per gallon of natural gas liquids (NGLs) sold. Please advise or expand your disclosure of the average wellhead prices used in the determination of the reserves provided on page 42 to include the price for NGLs. Company's Response: For the reasons set forth in our response above to Staff Comment No. 2, we have not reflected NGLs in our proved liquid reserves. As a result, we have not used the average wellhead prices of NGLs in the determination of our reserves. We will continue to monitor our NGLs and make the separate disclosure if they become material. Oil and Gas Reserves (Unaudited), page 173 Reserves, page 173 Comment No. 6: We note the following from your disclosure: • On page 175 you disclose that you invested $5.7 million to develop PUD locations in 2012; however, the table on that page indicates $4.9 million of future development costs were incurred for PUD locations. • On page 175 your disclosure is limited to the 3 gross PUD locations drilled in the Williston Basin during 2012; however, the table on page 43 indicates that in addition to wells drilled in the Williston Basin during 2012, you also drilled productive development and exploratory wells in the Powder River and Piceance Basins. • On page 175 your disclosure is limited to the 1.4 Bcfe of proved reserves that you converted or added in the Williston basin; however, the table on page 39 discloses your total 2012 additions from extensions and discoveries were 5.6 Bcfe. Please advise or expand you disclosure to reconcile the difference in the capital amounts invested and the net reserve additions and changes relating to your drilling activities during 2012 as required under Item 1203 of Regulation S-K and FASB ASC paragraph 932-235-50-5. Company's Response: • Staff Comment: On page 175 you disclose that you invested $5.7 million to develop PUD locations in 2012; however, the table on that page indicates $4.9 million of future development costs were incurred for PUD locations. Company's Response: The $5.7 million and $4.9 million are not intended to be compared. The $5.7 million represents the amounts invested to develop three Williston Basin PUD locations in our remaining Williston Basin assets. The $4.9 million represents future development costs included in the table on page 175 that have not yet been incurred as of December 31, 2012. These are costs that we would expect to incur in the future in connection with the development of these Williston Basin reserves. For future filings, beginning with our 2013 Form 10-K, we will clarify the wording in our presentation by separating the information into two different bullets, one for historical spending and the other for future development costs, to read as follows: • During 2012 we invested $5.7 million to develop three Williston Basin PUD locations in our remaining Williston Basin assets. • At December 31, 2012, our proved reserves, PUD locations and future development costs are reflected in the following table. Jim Allegretto U.S. Securities and Exchange Commission July 11, 2013 Page 5 • Staff Comment: On page 175 your disclosure is limited to the 3 gross PUD locations drilled in the Williston Basin during 2012; however, the table on page 43 indicates that in addition to wells drilled in the Williston Basin during 2012, you also drilled productive development and exploratory wells in the Powder River and Piceance Basins. • Staff Comment: On page 175 your disclosure is limited to the 1.4 Bcfe of proved reserves that you converted or added in the Williston basin; however, the table on page 39 discloses your total 2012 additions from extensions and discoveries were 5.6 Bcfe. Company's Response: Final Release No. 33-8995, which generated Item 1203 of Regulation S-K, requires disclosure in narrative form of information relating to proved undeveloped reserves while FASB ASC paragraph 932-235-50-5 requires disclosure of changes in net quantities of an entity's proved reserves. In applying the requirements of Item 1203, we included only information related to proved undeveloped reserves required under this Item. In applying the requirements of FASB ASC paragraph 932-235-50-5, we included information related to all of our proved reserves - developed and undeveloped - as required under this ASC. Because our reserve report reflects year over year results, development and exploratory wells drilled during a current year may not have been booked as proved undeveloped locations in the previous year's reserve report. In 2012, the only December 31, 2011 proved undeveloped reserves locations in which we invested were the 3 gross PUD locations drilled in the Williston Basin noted in our disclosure on page 175. Drilling activity in 2012 created locations in the Powder River and Piceance Basins classified as proved undeveloped that were also developed as proved developed producing during the year. These Powder River and Piceance Basin productive development and exploratory wells were not classified as proved undeveloped at either December 31, 2012 or 2011; therefore, we did not include these in our disclosure of proved undeveloped reserves on page 175. The narrative in the footnote on page 174 under the reserves tables references total reserve additions of 5.6 Bcfe, in agreement with the total 2012 additions from extensions and discoveries included in the table on page 39. The narrative and table found later in that footnote on the bottom of page 174 and at the top of page 175 were provided to reflect only the activity associated with proved undeveloped reserves that were recorded as of December 31, 2011 and December 31, 2012, in accordance with the requirements of Item 1203. The 1.4 Bcfe shown in that table is the portion of overall reserve additions from extensions and discoveries that was attributable to those locations classified as proved undeveloped at December 31, 2011 and 2012. In future filings, we will include additional headings in the footnote to more clearly delineate the information that is related to proved undeveloped reserves only. Standardized Measure of Discounted Future Net Cash Flows, page 176 Comment No. 7: Your disclosure of the standardized measure of discounted future net cash flows for each of the periods presented on page 176 does not appear to include the cost associated with the abandonment of your oil and gas assets as part of the future development costs. Please tell us how you have considered the inclusion of such costs in the preparation of the standardized measure relating to your proved oil and gas reserve quantities. Refer to the guidance provided by the Division of Corporation Finance at http://www.sec.gov/divisions/corpfin/guidance/oilgasletter.htm. Jim Allegretto U.S. Securities and Exchange Commission July 11, 2013 Page 6 Company's Response: We agree with the Staff's comment. We did not include the cost associated with the abandonment of oil and gas assets as part of the future development costs. We do not view these costs as material to the presentation of this estimate or to the users of our financial statements. Including the cost associated with the abandonment of oil and gas assets as part of the future development costs reduces the standardized measure of discounted future net cash flows by 4.1% at December 31, 2012. As reported, our stan