expenses, debt service and depreciation, depletion and amortization, and discounted using
an annual discount rate of 10% to reflect the timing of future cash flows. PV-10 is a
non-GAAP financial measure and often differs from Standardized Measure, the most
directly comparable GAAP financial measure, because it does not include the effects of
future income tax expense related to proved oil and gas reserves levied at a corporate
parent or intermediate subsidiary level on future net revenues. However, it does include
the effects of future tax expense levied at an asset level (in our case, it does include the
effects of future Ghanaian tax expense levied under the WCTP and DT PAs). Neither
PV-10 nor Standardized Measure represents an estimate of the fair market value of our
oil and natural gas assets. PV-10 should not be considered as an alternative to the
Standardized Measure as computed under GAAP; however, we and others in the industry
use PV-10 as a measure to compare the relative size and value of proved reserves held by
companies without regard to the specific corporate tax characteristics of such entities.
(2) Standardized Measure represents the present value of estimated future cash inflows to be
generated from the production of proved oil and natural gas reserves, net of future
development and production costs, future income tax expense related to our proved oil
and gas reserves levied at a corporate parent and intermediate subsidiary level, royalties,
additional oil entitlements and future tax expense levied at an asset level (in our case,
future Ghanaian tax expense levied under the WCTP and DT PAs), without giving effect
to hedging activities, non-property related expenses such as general and administrative
expenses, debt service and depreciation, depletion and amortization, and discounted using
an annual discount rate of 10% to reflect timing of future cash flows and using the same
pricing assumptions as were used to calculate PV-10. Standardized Measure often differs
from PV-10 because Standardized Measure includes the effects of future income tax
expense related to our proved oil and gas reserves levied at a corporate parent and
intermediate subsidiary level on future net revenues. However, as we are a tax exempted
company incorporated pursuant to the laws of Bermuda and as the Company’s
intermediate subsidiaries positioned between it and the subsidiary that is a signatory to
the WCTP and DT PAs continue to be tax exempted companies, we do not expect to be
subject to future income tax expense related to our proved oil and gas reserves levied at a
corporate parent or intermediate subsidiary level on future net revenues. Therefore, the
year-end 2013 estimate of PV-10 is equivalent to the Standardized Measure.
(3) The unweighted arithmetic average first-day-of-the-month prices for the prior 12 months
was $108.02/Bbl for Dated Brent at December 31, 2013. The price was adjusted for crude
handling, transportation fVW2