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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One)
For the quarterly period ended March 31, 2012 OR
For the transition period from to Commission file number 1-35322 WPX Energy, Inc. (Exact Name of Registrant as Specified in Its Charter)
855-979-2012 (Registrants Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ The number of shares outstanding of the registrants common stock at April 30, 2012 were 198,718,169. Table of ContentsWPX ENERGY, INC. Certain matters contained in this report include forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements relate to anticipated financial performance, managements plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements. Forward-looking statements can be identified by various forms of words such as anticipates, believes, seeks, could, may, should, continues, estimates, expects, forecasts, intends, might, goals, objectives, targets, planned, potential, projects, scheduled, will or other similar expressions. These forward-looking statements are based on managements beliefs and assumptions and on information currently available to management and include, among others, statements regarding:
2 Table of ContentsForward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. Forward-looking statements speak only as of the date they are made. We disclaim any obligation to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions or otherwise. Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011, and Part II, Item 1A. Risk Factors of this Form 10-Q. 3 Table of ContentsConsolidated Balance Sheet (Unaudited)
See accompanying notes. 4 Table of ContentsConsolidated Statement of Operations (Unaudited)
See accompanying notes. 5 Table of ContentsConsolidated Statement of Comprehensive Income (Loss) (Unaudited)
See accompanying notes. 6 Table of ContentsConsolidated Statement of Changes in Equity (Unaudited)
See accompanying notes. 7 Table of ContentsConsolidated Statement of Cash Flows (Unaudited)
See accompanying notes. 8 Table of ContentsNotes to Consolidated Financial Statements Note 1. General, Description of Business and Basis of Presentation General The accompanying interim consolidated financial statements do not include all the notes included in our annual financial statements and, therefore, should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 in our Annual report on Form 10-K, as amended. The accompanying interim consolidated financial statements include all normal recurring adjustments that, in the opinion of management, are necessary to present fairly our financial position at March 31, 2012, results of operations for the three months ended March 31, 2012 and 2011, changes in equity for the three months ended March 31, 2012 and cash flows for the three months ended March 31, 2012 and 2011. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Description of Business Operations of our company are located in the United States and South America and are organized into domestic and international reportable segments. Domestic includes natural gas development, production and gas management activities located in the Rocky Mountain (primarily Colorado, New Mexico, North Dakota and Wyoming) and Appalachian (Marcellus Shale) regions of the United States. We specialize in development and production from tight-sands and shale formations and coal bed methane reserves in the Piceance, San Juan, Powder River, Williston, Green River and Appalachian Basins. Associated with our commodity production are sales and marketing activities that include the management of various commodity contracts such as transportation, storage and related derivatives coupled with the sale of our commodity volumes. International primarily consists of our ownership in Apco Oil and Gas International Inc. (Apco, NASDAQ listed: APAGF), an oil and gas exploration and production company with concessions primarily in Argentina. The consolidated businesses represented herein as WPX Energy, Inc., also referred to herein as WPX or the Company, previously comprised substantially all of the exploration and production reportable segment of The Williams Companies, Inc. In these notes, WPX Energy, Inc. is at times referred to in the first person as WPX, we, us or our. The Williams Companies, Inc. and its affiliates, including Williams Partners L.P. (WPZ) are at times referred to collectively as Williams. Separation from Williams On February 16, 2011, Williams announced that its board of directors had approved pursuing a plan to separate Williams businesses into two stand-alone, publicly traded companies. As a result, WPX Energy, Inc. was formed to effect the separation. On November 30, 2011, the Board of Directors of Williams approved the spin-off of the Company. The spin-off was completed by way of a distribution on December 31, 2011. 9 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Basis of Presentation These financial statements are prepared on a consolidated basis. Prior to the separation from Williams, the financial statements were derived from the financial statements and accounting records of Williams using the historical results of operations and historical basis of the assets and liabilities of the entities contributed to us. Discontinued operations During the first quarter of 2012, our Board of Directors approved an agreement for the sale of our holdings in the Barnett Shale and the Arkoma Basin. As these assets are (1) currently held for sale; (2) expected to be eliminated from our ongoing operations; and (3) we do not expect to have any significant continuing involvement; we have reported the results of operations and financial position of Barnett and Arkoma operations as discontinued operations. The results of operations and financial position of our Arkoma operations were reported as discontinued operations during 2011 as we initiated a formal process to pursue the divestiture of those operations in the first quarter of 2011. Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to continuing operations. Note 2. Discontinued Operations Summarized Results of Discontinued Operations During the first quarter of 2012, our management signed an agreement to divest its holdings in the Barnett Shale and the Arkoma Basin for $306 million, subject to closing adjustments. The sales price is in excess of our net book value for these properties. The buyer provided $31 million in cash as a deposit at the signing of the agreement. The Barnett Shale properties include approximately 27,000 net acres, interests in 320 wells and 91 miles of pipeline. The Arkoma properties include approximately 66,000 net acres, interests in 525 wells and 115 miles of pipeline. As part of the sales agreement, we entered into certain derivative contracts on behalf of the purchaser. As of March, 31, 2012, the mark-to-market value of these derivatives was a net liability of less than $1 million.
Impairments in 2011 reflect write-downs to estimates of fair value less costs to sell the assets of our Arkoma Basin operations that were classified as held for sale as of March 31, 2011. This nonrecurring fair value measurement, which falls within Level 3 of the fair value hierarchy, utilized a probability-weighted discounted cash flow analysis that was based on internal cash flow models. The assets of our discontinued operations are approximately 3 percent of our total assets as of March 31, 2012 and December 31, 2011, and are reported in other current assets and other noncurrent assets, respectively, on our Consolidated Balance Sheet. Liabilities of our discontinued operations are less than one percent of total liabilities for the same periods and are reported in accrued and other current liabilities and other noncurrent liabilities, respectively. 10 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Note 3. Earnings (Loss) Per Common Share from Continuing Operations
On December 31, 2011, 197.1 million shares of our common stock were distributed to Williams shareholders in conjunction with our spin-off. For comparative purposes, and to provide a more meaningful calculation for weighted average shares, we have assumed this amount of common stock to be outstanding as of the beginning of each 2011 period presented in the calculation of basic and diluted weighted average shares. For the three months ended March 31, 2012, 2.5 million weighted-average nonvested restricted stock units and 1.3 million weighted-average stock options have been excluded from the computation of diluted earnings per common share as their inclusion would be antidilutive due to our loss from continuing operations attributable to WPX Energy, Inc. Note 4. Impairments and Exploration Expenses Impairment of cost of acquired unproved reserves As a result of continued declines in forward natural gas prices since year-end 2011, we performed an impairment assessment of our capitalized cost of acquired unproved reserves. Accordingly, we recorded a $37 million impairment of capitalized costs of acquired unproved reserves in the Powder River Basin and a $15 million impairment of capitalized costs of acquired unproved reserves in the Piceance Basin. Our impairment analyses included an assessment of discounted future cash flows, which considered information obtained from drilling, other activities and natural gas reserve quantities (See Note 9). Exploration expenses
11 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Note 5. Inventories
Due to lower natural gas prices, we recognized a lower of cost or market adjustment to natural gas in underground storage of approximately $11 million at March 31, 2012. This adjustment is reflected in gas management expense on the consolidated statement of operations for the three months ended March 31, 2012. Note 6. Debt and Banking Arrangements In November 2011 we issued $1.5 billion in face value Senior Notes. The Notes were issued under an indenture between us and The Bank of New York Mellon Trust Company, N.A., as trustee. The net proceeds from the offering of the Notes were approximately $1.481 billion after deducting the initial purchasers discounts and our offering expenses. We retained $500 million of the net proceeds from the issuance of the Notes and distributed the remainder of the net proceeds from the issuance of the Notes, approximately $981 million, to Williams. As part of the new issuance, we entered into a registration rights agreement whereby we agreed to offer to exchange the notes for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended, within 180 days from closing, to use commercially reasonable efforts to cause the registration statement to be declared effective within 270 days after closing and to consummate the exchange offer within 30 business days after such effective date. We are required to provide a shelf registration statement to cover resales of the notes under certain circumstances. If we fail to fulfill these obligations, additional interest will accrue on the affected securities until we have successfully registered the securities. On April 24, 2012, we filed a registration statement, however, the registration statement is not yet effective. During 2011 we entered into a new $1.5 billion five-year senior unsecured revolving credit facility agreement (the Credit Facility Agreement). Under the terms of the Credit Facility Agreement and subject to certain requirements, we may request an increase in the commitments of up to an additional $300 million by either commitments from new lenders or increased commitments from existing lenders. At March 31, 2012 there was no outstanding balance under the Credit Facility Agreement. Letters of Credit In addition to the Notes and Credit Facility Agreement, WPX has entered into three bilateral, uncommitted letter of credit (LC) agreements. These LC agreements provide WPX the ability to meet various contractual requirements and incorporate terms similar to those found in the Credit Facility Agreement. At March 31, 2012 a total of $278 million in letters of credit have been issued. Other Apco has a loan agreement with a financial institution for a $10 million bank line of credit. This debt agreement contains covenants that restrict or limit, among other things, our ability to create liens supporting indebtedness, purchase or sell assets outside the ordinary course of business and incur additional debt. As of March 31, 2012, Apco has borrowed $8 million under this banking agreement. 12 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Note 7. Provision (Benefit) for Income Taxes The provision (benefit) for income taxes from continuing operations includes:
The effective income tax rate on the total benefit for the three months ended March 31, 2012, is greater than the federal statutory rate due primarily to state income taxes and an adjustment to the minimum tax credit that was allocated to us by Williams as part of the spin-off, partially offset by taxes on foreign operations. The effective income tax rate on the total provision for the three months ended March 31, 2011, is less than the federal statutory rate due primarily to taxes on foreign operations, partially offset by state income taxes. As of March 31, 2012, the amount of unrecognized tax benefits is insignificant. During the next 12 months, we do not expect ultimate resolution of any uncertain tax position associated with a domestic or international matter will result in a significant increase or decrease of our unrecognized tax benefit. Note 8. Contingent Liabilities Royalty litigation In September 2006, royalty interest owners in Garfield County, Colorado, filed a class action suit in District Court, Garfield County, Colorado, alleging we improperly calculated oil and gas royalty payments, failed to account for proceeds received from the sale of natural gas and extracted products, improperly charged certain expenses and failed to refund amounts withheld in excess of ad valorem tax obligations. Plaintiffs sought to certify a class of royalty interest owners, recover underpayment of royalties and obtain corrected payments resulting from calculation errors. We entered into a final partial settlement agreement. The partial settlement agreement defined the class for certification resolved claims relating to past calculation of royalty and overriding royalty payments, established certain rules to govern future royalty and overriding royalty payments, resolved claims related to past withholding for ad valorem tax payments, established a procedure for refunds of any such excess withholding in the future, and reserved two claims for court resolution. We have prevailed at the trial court and all levels of appeal on the first reserved claim regarding whether we are allowed to deduct mainline pipeline transportation costs pursuant to certain lease agreements. The remaining claim is whether we are required to have proportionately increased the value of natural gas by transporting that gas on mainline transmission lines and, if required, whether we did so and are entitled to deduct a proportionate share of 13 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) transportation costs in calculating royalty payments. We anticipate litigating the second reserved claim in 2013. We believe our royalty calculations have been properly determined in accordance with the appropriate contractual arrangements and Colorado law. At this time, the plaintiffs have not provided us a sufficient framework to calculate an estimated range of exposure related to their claims. In October 2011, a potential class of royalty interest owners in New Mexico and Colorado filed a complaint against us in the County of Rio Arriba, New Mexico. The complaint alleges failure to pay royalty on hydrocarbons including drip condensate, fraud and misstatement of value of gas and affiliated sales, breach of duty to market hydrocarbons, violation of the New Mexico Oil and Gas Proceeds Payment Act, bad faith breach of contract and unjust enrichment. Plaintiffs seek monetary damages and a declaratory judgment enjoining activities relating to production and payments and future reporting. This matter has been removed to the United States District Court for New Mexico. At this time, we believe that our royalty calculations have been properly determined in accordance with the appropriate contractual arrangements and applicable laws. We do not have sufficient information to calculate an estimated range of exposure related to these claims. Other producers have been in litigation with a federal regulatory agency and discussions with a state agency in New Mexico regarding certain deductions, comprised primarily of processing, treating and transportation costs, used in the calculation of royalties. Although we are not a party to those matters, we have monitored them to evaluate whether their resolution might have the potential for unfavorable impact on our results of operations. Certain outstanding issues in those matters could be material to us. We received notice from the U.S. Department of Interior Office of Natural Resources Revenue (ONRR) in the fourth quarter of 2010, intending to clarify the guidelines for calculating federal royalties on conventional gas production applicable to our federal leases in New Mexico. The ONRRs guidance provides its view as to how much of a producers bundled fees for transportation and processing can be deducted from the royalty payment. We believe using these guidelines would not result in a material difference in determining our historical federal royalty payments for our leases in New Mexico. No similar specific guidance has been issued by ONRR for leases in other states though such guidelines are expected in the future. However, the timing of any such guidance is uncertain. The issuance of similar guidelines in Colorado and other states could affect our previous royalty payments, and the effect could be material to our results of operations. Interpretive guidelines on the applicability of certain deductions in the calculation of federal royalties are extremely complex and may vary based upon the ONRRs assessment of the configuration of processing, treating and transportation operations supporting each federal lease. Correspondence in 2009 with the ONRRs predecessor did not take issue with our calculation regarding the Piceance Basin assumptions, which we believe have been consistent with the requirements. From January 2004 through December 2011, our deductions used in the calculation of the royalty payments in states other than New Mexico associated with conventional gas production total approximately $74 million. The New Mexico State Land Office Commissioner has filed suit against us in Santa Fe County alleging that we have underpaid royalties due per the oil and gas leases with the State of New Mexico. In August 2011, the parties agreed to stay this matter pending the New Mexico Supreme Courts resolution of a similar matter involving a different producer. At this time, we do not have a sufficient basis to calculate an estimated range of exposure related to this claim. Environmental matters The Environmental Protection Agency (EPA) and various state regulatory agencies routinely promulgate and propose new rules, and issue updated guidance to existing rules. These new rules and rulemakings include, but are not limited to, rules for reciprocating internal combustion engine maximum achievable control technology, new air quality standards for ground level ozone, one hour nitrogen dioxide emission limits, and hydraulic fracturing and water standards. We are unable to estimate the costs of asset additions or modifications 14 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) necessary to comply with these new regulations due to uncertainty created by the various legal challenges to these regulations and the need for further specific regulatory guidance. Matters related to Williams former power business In connection with the Separation and Distribution Agreement, Williams is obligated to indemnify and hold us harmless from any losses arising out of liabilities assumed by us, and we are obligated to pay Williams any net proceeds realized from, the pending or threatened litigation described below relating to the 2000-2001 California energy crisis and the reporting of certain natural gas-related information to trade publications. California energy crisis Our former power business was engaged in power marketing in various geographic areas, including California. Prices charged for power by us and other traders and generators in California and other western states in 2000 and 2001 were challenged in various proceedings, including those before the Federal Energy Regulatory Commission (FERC). We have entered into settlements with the State of California (State Settlement), major California utilities (Utilities Settlement), and others that substantially resolved each of these issues with these parties. Although the State Settlement and Utilities Settlement resolved a significant portion of the refund issues among the settling parties, we continue to have potential refund exposure to nonsettling parties, including various California end users that did not participate in the Utilities Settlement. We are currently in settlement negotiations with certain California utilities aimed at eliminating or substantially reducing this exposure. If successful, and subject to a final true-up mechanism, the settlement agreement would also resolve our collection of accrued interest from counterparties as well as our payment of accrued interest on refund amounts. Thus, as currently contemplated by the parties, the settlement agreement would resolve most, if not all, of our legal issues arising from the 2000-2001 California energy crisis. With respect to these matters, amounts accrued are not material to our financial position. Certain other issues also remain open at the FERC and for other nonsettling parties. Reporting of natural gas-related information to trade publications Civil suits based on allegations of manipulating published gas price indices have been brought against us and others, seeking unspecified amounts of damages. We are currently a defendant in class action litigation and other litigation originally filed in state court in Colorado, Kansas, Missouri and Wisconsin brought on behalf of direct and indirect purchasers of natural gas in those states. These cases were transferred to the federal court in Nevada. In 2008, the court granted summary judgment in the Colorado case in favor of us and most of the other defendants based on plaintiffs lack of standing. On January 8, 2009, the court denied the plaintiffs request for reconsideration of the Colorado dismissal and entered judgment in our favor. When a final order is entered against the one remaining defendant, the Colorado plaintiffs may appeal the order. In the other cases, on July 18, 2011, the Nevada district court granted our joint motions for summary judgment to preclude the plaintiffs state law claims because the federal Natural Gas Act gives the FERC exclusive jurisdiction to resolve those issues. The court also denied the plaintiffs class certification motion as moot. The plaintiffs have appealed to the United States Court of Appeals for the Ninth Circuit. Because of the uncertainty around pending unresolved issues, including an insufficient description of the purported classes and other related matters, we cannot reasonably estimate a range of potential exposures at this time. However, it is reasonably possible that the ultimate resolution of these items could result in future charges that may be material to our results of operations. 15 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Other Indemnifications Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, environmental matters, right of way and other representations that we have provided. At March 31, 2012, we have not received a claim against any of these indemnities and thus have no basis from which to estimate any reasonably possible loss. Further, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. However, if a claim for indemnity is brought against us in the future, it may have a material adverse effect on our results of operations in the period in which the claim is made. In connection with the separation from Williams, we have agreed to indemnify and hold Williams harmless from any losses resulting from the operation of our business or arising out of liabilities assumed by us. Similarly, Williams has agreed to indemnify and hold us harmless from any losses resulting from the operation of its business or arising out of liabilities assumed by it. Summary As of March 31, 2012 and December 31, 2011, the Company had accrued approximately $19 million and $23 million, respectively, for loss contingencies associated with royalty litigation, reporting of natural gas information to trade publications and other contingencies. In certain circumstances, we may be eligible for insurance recoveries, or reimbursement from others. Any such recoveries or reimbursements will be recognized only when realizable. Management, including internal counsel, currently believes that the ultimate resolution of the foregoing matters, taken as a whole and after consideration of amounts accrued, insurance coverage, recovery from customers or other indemnification arrangements, is not expected to have a materially adverse effect upon our future liquidity or financial position; however, it could be material to our results of operations in any given year. Note 9. Fair Value Measurements The following table presents, by level within the fair value hierarchy, our assets and liabilities that are measured at fair value on a recurring basis.
Energy derivatives include commodity based exchange-traded contracts and over-the-counter (OTC) contracts. Exchange-traded contracts include futures, swaps and options. OTC contracts include forwards, swaps, options and swaptions. 16 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Many contracts have bid and ask prices that can be observed in the market. Our policy is to use a mid-market pricing (the mid-point price between bid and ask prices) convention to value individual positions and then adjust on a portfolio level to a point within the bid and ask range that represents our best estimate of fair value. For offsetting positions by location, the mid-market price is used to measure both the long and short positions. The determination of fair value for our assets and liabilities also incorporates the time value of money and various credit risk factors which can include the credit standing of the counterparties involved, master netting arrangements, the impact of credit enhancements (such as cash collateral posted and letters of credit) and our nonperformance risk on our liabilities. The determination of the fair value of our liabilities does not consider noncash collateral credit enhancements. Exchange-traded contracts include New York Mercantile Exchange and Intercontinental Exchange contracts and are valued based on quoted prices in these active markets and are classified within Level 1. Forward, swap and option contracts included in Level 2 are valued using an income approach including present value techniques and option pricing models. Option contracts, which hedge future sales of our production, are structured as costless collars or as swaptions and are financially settled. All of our financial options are valued using an industry standard Black-Scholes option pricing model. In connection with several crude oil swaps entered into, we granted crude oil swaptions to the swap counterparties in exchange for receiving premium hedged prices on the crude oil swaps. These swaptions grant the counterparty the option to enter into future swaps with us. Significant inputs into our Level 2 valuations include commodity prices, implied volatility by location and interest rates, as well as considering executed transactions or broker quotes corroborated by other market data. These broker quotes are based on observable market prices at which transactions could currently be executed. In certain instances where these inputs are not observable for all periods, relationships of observable market data and historical observations are used as a means to estimate fair value. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. Our energy derivatives portfolio is largely comprised of exchange-traded products or like products and the tenure of our derivatives portfolio is relatively short with more than 99 percent of the net fair value of our derivatives portfolio expiring in the next 12 months. Due to the nature of the products and tenure, we are consistently able to obtain market pricing. All pricing is reviewed on a daily basis and is formally validated with broker quotes and documented on a monthly basis. Certain instruments trade with lower availability of pricing information. These instruments are valued with a present value technique using inputs that may not be readily observable or corroborated by other market data. These instruments are classified within Level 3 when these inputs have a significant impact on the measurement of fair value. The instruments included in Level 3 at March 31, 2012, consist primarily of natural gas index transactions that are used to manage our physical requirements. Reclassifications of fair value between Level 1, Level 2 and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter. No transfers between Level 1 and Level 2 occurred during the periods ended March 31, 2012 and 2011. During the period ended March 31, 2011, certain NGL swaps that originated during the first quarter of 2011 were transferred from Level 3 to Level 2. Prior to March 31, 2011, these swaps were considered Level 3 due to a lack of observable third-party market quotes. Due to an increase in exchange-traded transactions and greater visibility from OTC trading, we transferred these instruments to Level 2. 17 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) The following table presents a reconciliation of changes in the fair value of our net energy derivatives and other assets classified as Level 3 in the fair value hierarchy. Level 3 Fair Value Measurements Using Significant Unobservable Inputs
Realized and unrealized gains (losses) included in income (loss) from continuing operations for the above periods are reported in revenues in our Consolidated Statement of Operations. The following table presents impairments associated with certain assets that have been measured at fair value on a nonrecurring basis within Level 3 of the fair value hierarchy.
18 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Note 10. Financial Instruments, Derivatives, Guarantees and Concentration of Credit Risk We use the following methods and assumptions for financial instruments that require fair value disclosure. Cash and cash equivalents and restricted cash: The carrying amounts reported in the Consolidated Balance Sheet approximate fair value due to the nature of the instrument and/or the short-term maturity of these instruments. Other: Includes margin deposits and customer margin deposits payable for which the amounts reported in the Consolidated Balance Sheet approximate fair value given the short-term status of the instruments. Long-term debt: The fair value of our debt is determined on market rates and the prices of similar securities with similar terms and credit ratings. Energy derivatives: Energy derivatives include futures, forwards, swaps, options and swaptions. These are carried at fair value in the Consolidated Balance Sheet. See Note 9 for a discussion of valuation of energy derivatives. Carrying amounts and fair values of our financial instruments were as follows:
Energy Commodity Derivatives Risk Management Activities We are exposed to market risk from changes in energy commodity prices within our operations. We utilize derivatives to manage exposure to the variability in expected future cash flows from forecasted sales of natural gas, natural gas liquids and crude oil attributable to commodity price risk. Certain of these derivatives utilized for risk management purposes have been designated as cash flow hedges, while other derivatives have not been designated as cash flow hedges or do not qualify for hedge accounting despite hedging our future cash flows on an economic basis. We produce, buy and sell natural gas, natural gas liquids and crude oil at different locations throughout the United States. To reduce exposure to a decrease in revenues from fluctuations in commodity market prices, we enter into futures contracts, swap agreements and financial option contracts to mitigate the price risk on forecasted sales of natural gas, natural gas liquids and crude oil. We have also entered into basis swap agreements to reduce the locational price risk associated with our natural gas producing basins. Those agreements and contracts designated as cash flow hedges are expected to be highly effective in offsetting cash flows attributable to the hedged risk during the term of the hedge. However, ineffectiveness may be recognized 19 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) primarily as a result of locational differences between the hedging derivative and the hedged item. Our financial option contracts are purchased options, a combination of options that comprise a net purchased option or a zero-cost collar or swaptions. Our designation of the hedging relationship and method of assessing effectiveness for these option contracts are generally such that the hedging relationship is considered perfectly effective and no ineffectiveness is recognized in earnings. The following table sets forth the derivative volumes designated as hedges of production volumes as of March 31, 2012:
The following table sets forth the derivative volumes not designated as hedges of production volumes as of March 31, 2012:
We also enter into forward contracts to buy and sell natural gas to maximize the economic value of transportation agreements and storage capacity agreements. To reduce exposure to a decrease in margins from fluctuations in natural gas market prices, we may enter into futures contracts, swap agreements and financial option contracts to mitigate the price risk associated with these contracts. Derivatives for transportation and storage contracts have not been designated as hedging instruments, despite economically hedging the expected cash flows generated by those agreements. 20 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) We also enter into energy commodity derivatives for other than risk management purposes, including managing certain remaining legacy natural gas contracts and positions from our former power business and providing services to third parties and affiliated entities. These legacy natural gas contracts include substantially offsetting positions and have had an insignificant net impact on earnings. The following table depicts the notional amounts of the net long (short) positions which do not represent hedges of our production in our commodity derivatives portfolio as of March 31, 2012. Natural gas is presented in millions of British Thermal Units (MMBtu). All of the Central hub risk realizes by March 31, 2013 and 83% of the basis risk realizes by 2013. The net index position includes contracts for the future sale of physical natural gas related to our production. Offsetting these sales are contracts for the future production of physical natural gas related to WPZs natural gas shrink requirements. These contracts result in minimal commodity price risk exposure and have a value of less than $1 million at March 31, 2012.
Fair values and gains (losses) The following table presents the fair value of energy commodity derivatives. Our derivatives are presented as separate line items in our Consolidated Balance Sheet as current and noncurrent derivative assets and liabilities. Derivatives are classified as current or noncurrent based on the contractual timing of expected future net cash flows of individual contracts. The expected future net cash flows for derivatives classified as current are expected to occur within the next 12 months. The fair value amounts are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements. Further, the amounts below do not include cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions.
21 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) The following table presents pre-tax gains and losses for our energy commodity derivatives designated as cash flow hedges, as recognized in accumulated other comprehensive income (AOCI) or revenues.
There were no gains or losses recognized in income as a result of excluding amounts from the assessment of hedge effectiveness. The following table presents pre-tax gains and losses for our energy commodity derivatives not designated as hedging instruments.
The cash flow impact of our derivative activities is presented in the Consolidated Statement of Cash Flows as changes in current and noncurrent derivative assets and liabilities. Credit-risk-related features Certain of our derivative contracts contain credit-risk-related provisions that would require us, under certain events, to post additional collateral in support of our net derivative liability positions. These credit-risk-related provisions require us to post collateral in the form of cash or letters of credit when our net liability positions exceed an established credit threshold. The credit thresholds are typically based on our senior unsecured debt ratings from Standard and Poors and/or Moodys Investment Services. Under these contracts, a credit ratings decline would lower our credit thresholds, thus requiring us to post additional collateral. We also have contracts that contain adequate assurance provisions giving the counterparty the right to request collateral in an amount that corresponds to the outstanding net liability. As of March 31, 2012, we had a net derivative liability position of $31 million, which includes a liability credit reserve for our own nonperformance risk of less than $1 million. The collateral that we would be required to post, assuming our credit thresholds were eliminated and a call for adequate assurance under the credit risk provisions in our derivative contracts were triggered, was $15 million. 22 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) Cash flow hedges Changes in the fair value of our cash flow hedges, to the extent effective, are deferred in AOCI and reclassified into earnings in the same period or periods in which the hedged forecasted purchases or sales affect earnings, or when it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period. During March 2012, approximately $15 million of unrealized gains were recognized into earnings in 2012 for hedge transactions where the underlying transactions were no longer probable of occurring due to the sale of our Barnett Shale properties. The $15 million gain is included in mark to market gains and losses and hedge ineffectiveness on the consolidated statement of operations for the three months ended March 31, 2012. As of March 31, 2012, we have hedged portions of future cash flows associated with anticipated energy commodity purchases and sales for up to twelve months. Based on recorded values at March 31, 2012, $218 million of net gains (net of income tax provision of $126 million) will be reclassified into earnings within the next year. These recorded values are based on market prices of the commodities as of March 31, 2012. Due to the volatile nature of commodity prices and changes in the creditworthiness of counterparties, actual gains or losses realized within the next year will likely differ from these values. These gains or losses are expected to substantially offset net losses or gains that will be realized in earnings from previous unfavorable or favorable market movements associated with underlying hedged transactions. Concentration of Credit Risk Derivative assets and liabilities We have a risk of loss from counterparties not performing pursuant to the terms of their contractual obligations. Counterparty performance can be influenced by changes in the economy and regulatory issues, among other factors. Risk of loss is impacted by several factors, including credit considerations and the regulatory environment in which a counterparty transacts. We attempt to minimize credit-risk exposure to derivative counterparties and brokers through formal credit policies, consideration of credit ratings from public ratings agencies, monitoring procedures, master netting agreements and collateral support under certain circumstances. Collateral support could include letters of credit, payment under margin agreements, and guarantees of payment by credit worthy parties. We also enter into master netting agreements to mitigate counterparty performance and credit risk. During 2012 and 2011 we did not incur any significant losses due to counterparty bankruptcy filings. The gross credit exposure from our derivative contracts as of March 31, 2012, is summarized as follows.
23 Table of ContentsWPX Energy, Inc. Notes to Consolidated Financial Statements(continued) We assess our credit exposure on a net basis to reflect master netting agreements in place with certain counterparties. We offset our credit exposure to each counterparty with amounts we owe the counterparty under derivative contracts. The net credit exposure from our derivatives as of March 31, 2012, excluding collateral support discussed below, is summarized as follows.
Our eight largest net counterparty positions represent approximately 99 percent of our net credit exposure from derivatives and are all with investment grade counterparties. Under our new marginless hedging agreements with key banks, we nor the participating financial institutions are required to provide collateral support related to hedging activities. At March 31, 2012, we did not hold collateral support, either in the form of cash or letters of credit, related to our other derivative positions. Note 11. Segment Disclosures Our reporting segments are domestic and international (See Note 1). Our segment presentation is reflective of the parent-level focus by our chief operating decision-maker, considering the resource allocation and governance provisions. Domestic and international maintain separate capital and cash management structures. These factors, coupled with differences in the business environment associated with operating in different countries, serve to differentiate the management of this entity as a whole. Performance Measurement We evaluate performance based upon segment revenues and segment operating income (loss). There are no intersegment sales between domestic and international. 24 Table of ContentsThe following tables reflect the reconciliation of segment revenues and segment operating income (loss) to revenues and operating income (loss) as reported in the Consolidated Statement of Operations.
25 Table of Contents
General The following discussion should be read in conjunction with the selected historical consolidated financial data and the consolidated financial statements and the related notes included in Part I, Item 1 in this Form 10-Q. The matters discussed below may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-Q, particularly in Risk Factors and Forward-Looking Statements. Overview The following table presents our production volumes and financial highlights for the three months ended March 31, 2012 and 2011:
Our 2012 results continue to be impacted by natural gas prices that continue to decline relative to first-quarter 2011. Also, as a result of declines in forward natural gas prices during first quarter 2012, we recorded impairments of costs of acquired unproved reserves in the Powder River and Piceance Basins of approximately $37 million and $15 million, respectively. Partially offsetting the impact of these declining natural gas prices and impairments is the increased oil and natural gas liquids production. We expect to continue oil and natural gas production increases period-over-period throughout 2012. As noted in our Form 10-K with regards to potential impairment of our producing assets, we estimated that approximately eight percent could be at risk for impairment if forward prices across all future periods declined by approximately 12 percent to 15 percent, on average, as compared to the forward prices at December 31, 2011. A substantial portion of the remaining carrying value of these other assets could be at risk for impairment if forward prices across all future periods decline by at least 24 percent, on average, as compared to the prices at December 31, 2011. Through March 31, 2012, forward natural gas prices have continued to decline from December 31, 26 Table of Contents2011 and averaged nine percent over all periods with a decline greater than 20 percent in 2012. While the prices have not declined to a level to trigger an impairment of our producing properties, we estimate that an additional five to six percent decline in the forward prices could result in impairment charges on approximately 12 percent of our producing assets. If forward prices were to decline an additional 18 percent on average across all periods, a substantial portion of the remaining carrying value of the remaining producing assets could be at risk for impairment. Outlook Although we are experiencing low natural gas prices, we believe we are well positioned to execute our business strategy of finding and developing reserves and producing natural gas, NGLs and oil at costs that will generate an attractive rate of return on our consolidated incremental development investments. Our focus for the remainder of 2012 is to continue to develop our natural gas portfolio to maintain current natural gas production levels, including the associated leasehold acreage, and grow our oil and natural gas liquids production. At current commodity pricing levels, we are focused on continuing to develop a more balanced reserve and production portfolio that will include a larger portion of oil and NGLs reserves than we have historically maintained. With lower natural gas prices, we will continue to maintain our focus on drilling strategically to manage leasehold expirations and maintain our liquidity. A continued decrease in forward natural gas prices could signal a need to reduce capital spending in 2012 to maintain the liquidity and balance sheet we believe necessary to run our business. We believe that our portfolio of reserves provides us an opportunity to continue to grow in our areas where we have oil production (Williston Basin) and high concentrations of NGLs (Piceance Basin), which we believe will generate long-term sustainable value for shareholders. If gas prices were to increase, we believe we have the operational flexibility to respond by increasing our drilling in our natural gas areas. We expect 2012 capital expenditures to be approximately $1.2 billion. We continue to operate with a focus on increasing shareholder value and investing in our businesses in a way that enhances our competitive position by:
Potential risks or obstacles that could impact the execution of our plan include:
27 Table of ContentsWe continue to address certain of these risks through utilization of commodity hedging strategies, disciplined investment strategies and maintaining adequate liquidity. In addition, we utilize master netting agreements and collateral requirements with our counterparties to reduce credit risk and liquidity requirements. Through December 2011, we elected to designate the majority of our applicable derivative instruments as cash flow hedges. Beginning in 2012, we began entering into commodity derivative contracts that continue to serve as economic hedges but are not designated as hedges for accounting purposes as we have elected not to utilize hedge accounting on new derivatives instruments. Changes in the fair value of non-hedge derivative instruments, hereafter referred to as economic hedges, are recognized as gains or losses in the earnings of the periods in which they occur, accordingly we believe this will result in future earnings that are more volatile. Hedged derivatives recorded at March 31, 2012 that are included in accumulated other comprehensive income have been and will continue to be transferred to earnings during the same periods in which the forecasted hedged transactions are recognized. Commodity Price Risk Management To manage the commodity price risk and volatility of owning producing gas and oil properties, we enter into derivative contracts for a portion of our future production. For the remainder of 2012 we have the following contracts as of March 31, 2012 for our daily domestic production, shown at weighted average volumes and basin-level weighted average prices:
Additionally, we utilize contracted pipeline capacity to move our production from the Rockies to other locations when pricing differentials are favorable to Rockies pricing. We also hold a long-term obligation to deliver on a firm basis 200,000 MMbtu/d of natural gas at monthly index pricing to a buyer at the White River Hub (Greasewood-Meeker, CO), which is a major market hub exiting the Piceance Basin. Our interests in the Piceance Basin hold sufficient reserves to meet this obligation, which expires in 2014. Results of Operations Operations of our company are located in the United States and South America and are organized into domestic and international reportable segments. 28 Table of ContentsDomestic includes natural gas, natural gas liquids and oil development, production and gas management activities located in the Rocky Mountain (primarily Colorado, New Mexico, North Dakota and Wyoming), and Appalachian regions of the United States. Our development and production techniques specialize in production from tight-sands and shale formations as well as coal bed methane reserves in the Piceance, San Juan, Powder River, Green River, Williston and Appalachian Basins. Associated with our commodity production are sales and marketing activities that include the management of various commodity contracts such as transportation, storage, and related hedges coupled with the sale of our commodity volumes. International primarily consists of our ownership in Apco, an oil and gas exploration and production company with concessions primarily in Argentina. Three Month-Over-Three Month Results of Operations Revenue Analysis
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200. Domestic Revenues Significant variances in comparative revenues reflect:
29 Table of Contents
International Revenues International revenues increased primarily due to increased oil sales due to higher average oil sales prices for the three months ended March 31, 2012 compared to the same period in 2011. Cost and operating expense and operating income (loss) analysis:
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200. 30 Table of ContentsDomestic Costs Significant variances in comparative costs and expenses reflect:
International costs International costs increased primarily due to increased exploration expenses related to 3-D seismic acquisition costs. Consolidated results below operating income (loss)
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200. 31 Table of ContentsInterest expense in 2012 reflects interest accrued on our senior notes, issued in November 2011. Interest expense in 2011 reflects interest associated with our unsecured notes payable with Williams. These amounts were cancelled by Williams and contributed to capital on June 30, 2011. Our investment income results primarily from equity earnings associated with our international and domestic equity investments. Provision (benefit) for income taxes changed favorably due to the pre-tax loss in 2012 compared to the pre-tax income in 2011. See Note 7 for a discussion of the effective tax rates compared to the federal statutory rate for both periods. Managements Discussion and Analysis of Financial Condition and Liquidity Outlook We expect our capital structure will provide us financial flexibility to meet our requirements for working capital, capital expenditures and tax and debt payments while maintaining a sufficient level of liquidity. We retained approximately $500 million of the net proceeds from the issuance of the Notes and have a $1.5 billion credit facility. These sources of liquidity along with our expected cash flows from operations should be sufficient to allow us to pursue our business strategy and goals for the remainder of 2012 and 2013. If energy commodity prices for 2012 and 2013 continue to trend lower, as they have done during early 2012, we believe the effect on our cash flows from operations would be partially mitigated by our hedging program. In addition, we note the following assumptions for the remainder of 2012 and 2013:
Potential risks associated with our planned levels of liquidity and the planned capital and investment expenditures discussed above include:
Liquidity We plan to conservatively manage our balance sheet. Based on our forecasted levels of cash flow from operations and other sources of liquidity, we expect to have sufficient liquidity to manage our businesses throughout 2012. Our internal and external sources of consolidated liquidity include cash generated from operations, cash and cash equivalents on hand and our credit facility. Additional sources of liquidity, if needed and if available, include bank financings, proceeds from the issuance of long-term debt and equity securities and proceeds from asset sales. As of March 31, 2012 we have not accessed our credit facility. 32 Table of ContentsSources (Uses) of Cash The following table and discussion summarize our sources (uses) of cash for the three months ended March 31, 2012 and 2011.
Operating activities Our net cash provided by operating activities for the three months ended March 31, 2012 increased from the same period in 2011 primarily due to net favorable changes in our operating assets and liabilities. Investing activities Significant transactions include expenditures for drilling and completion of $373 million and $286 million for the three months ended March 31, 2012 and 2011, respectively. Our capital expenditures for the three months ended March 31, 2012, do not reflect the decrease in our drilling activity in the first three months, however, we expect our capital expenditures for the year to be approximately $1.2 billion. Also included in 2012 is a $31 million deposit received from the buyers of the Barnett and Arkoma properties. Financing activities The use of cash in 2012 primarily relates to changes in our cash overdrafts. Cash provided in 2011 related to our net increase in notes payable to Williams. Off-Balance Sheet Financing Arrangements We had no guarantees of off-balance sheet debt to third parties or any other off-balance sheet arrangements at March 31, 2012 and December 31, 2011. 33 Table of ContentsQuantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first three months of 2012. Commodity Price Risk We are exposed to the impact of fluctuations in the market price of natural gas, natural gas liquids and crude oil, as well as other market factors, such as market volatility and energy commodity price correlations. We are exposed to these risks in connection with our owned energy-related assets, our long-term energy-related contracts and our proprietary trading activities. We manage the risks associated with these market fluctuations using various derivatives and nonderivative energy-related contracts. The fair value of derivative contracts is subject to many factors, including changes in energy commodity market prices, the liquidity and volatility of the markets in which the contracts are transacted and changes in interest rates. We measure the risk in our portfolios using a value-at-risk methodology to estimate the potential one-day loss from adverse changes in the fair value of the portfolios. Value at risk requires a number of key assumptions and is not necessarily representative of actual losses in fair value that could be incurred from the portfolios. Our value-at-risk model uses a Monte Carlo method to simulate hypothetical movements in future market prices and assumes that, as a result of changes in commodity prices, there is a 95 percent probability that the one-day loss in fair value of the portfolios will not exceed the value at risk. The simulation method uses historical correlations and market forward prices and volatilities. In applying the value-at-risk methodology, we do not consider that the simulated hypothetical movements affect the positions or would cause any potential liquidity issues, nor do we consider that changing the portfolios in response to market conditions could affect market prices and could take longer than a one-day holding period to execute. While a one-day holding period has historically been the industry standard, a longer holding period could more accurately represent the true market risk given market liquidity and our own credit and liquidity constraints. We segregate our derivative contracts into trading and nontrading contracts, as defined in the following paragraphs. We calculate value at risk separately for these two categories. Contracts designated as normal purchases or sales and nonderivative energy contracts have been excluded from our estimation of value at risk. We have policies and procedures that govern our trading and risk management activities. These policies cover authority and delegation thereof in addition to control requirements, authorized commodities and term and exposure limitations. Value-at-risk is limited in aggregate and calculated at a 95 percent confidence level. Trading Our trading portfolio consists of derivative contracts entered into for purposes other than economically hedging our commodity price-risk exposure. The fair value of our trading derivatives was a net asset of $1 million at March 31, 2012 and a net liability of $4 million at December 31, 2011. The value at risk for contracts held for trading purposes was less than $1 million at both March 31, 2012 and March 31, 2011. Nontrading Our nontrading portfolio consists of derivative contracts that hedge or could potentially hedge the price risk exposure from our natural gas purchases and sales. The fair value of our derivatives not designated as hedging instruments was a net asset of $11 million and $14 million at March 31, 2012 and December 31, 2011 respectively. 34 Table of ContentsThe value at risk for derivative contracts held for nontrading purposes was $16 million at March 31, 2012, and $15 million at December 31, 2011. During the last 12 months, our value at risk for these contracts ranged from a high of $30 million to a low of $15 million. The decrease in value at risk from March 31, 2011 primarily reflects the realization of certain derivative positions and the market price impact, partially offset by new derivative contracts. Certain of the derivative contracts held for nontrading purposes are accounted for as cash flow hedges. Of the total fair value of nontrading derivatives, cash flow hedges had a net asset value of $343 million and $347 million as of March 31, 2012 and December 31, 2011, respectively. The decrease in value is primarily due to 2012 natural gas realizations mostly offset by favorable changes due to falling prices on a net short natural gas positions. Though these contracts are included in our value-at-risk calculation, any changes in the fair value of the effective portion of these hedge contracts would generally not be reflected in earnings until the associated hedged item affects earnings. 35 Table of ContentsControls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act) (Disclosure Controls) or our internal controls over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant. Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level. First-Quarter 2012 Changes in Internal Controls There have been no changes during the first quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our Internal Controls. 36 Table of Contents
The information called for by this item is provided in Note 8 of Notes to Consolidated Financial Statements included under Part I, Item 1. Financial Statements of this report, which information is incorporated by reference into this item.
Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011, includes certain risk factors that could materially affect our business, financial condition or future results. Those Risk Factors have not materially changed, except as set forth below: The Argentine government could take action with regard to our concessions before their contract terms expire. During the first quarter of 2012, the Argentine government asserted that certain exploration and production companies operating in Argentina had not invested sufficiently to overcome Argentinas domestic production declines, thereby leading to reduced levels of oil and natural gas production as well as reductions in oil and natural gas proved reserves. On that basis, six provinces rescinded certain of Repsol YPF S.A.s (YPF) and other producers concessions. In addition, the federal government expropriated a majority interest in YPF, the largest oil producing company in Argentina. If the government subjectively determines that we have not sufficiently invested in our properties, they could take action with regard to our concessions before their contract terms expire. 37 Table of Contents
38 Table of Contents
39 Table of ContentsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 3, 2012 40 |


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There are outstanding changes not yet made by the legislation.gov.uk editorial team to Births and Deaths Registration (Northern Ireland) Order 1976. Any changes that have already been made by the team appear in the content and are referenced with annotations.
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21.—(1) Subject to this Part, the death of every person shall be registered by the registrar for the district—
(a)in which the person died; or
(b)in which the person was ordinarily resident immediately before his death;
in a register maintained by him for the purpose, together with the cause of the death and such other particulars concerning the death as may be prescribed.
(2) Where—
(a)the body of any dead person is found; and
(b)there is not available any information as to the place where he died;
the death shall be registered in the district in which the body is found.
(3) Where—
(a)the body of any dead person is found in any river, lake, arm of the sea or other area of water; and
(b)there is not available any information as to the place where he died;
the death shall be registered in the district where the body is brought to land from the area of water in question.
(4) The following persons shall be qualified to give information concerning a death, that is to say:—
(a)any relative of the deceased who has knowledge of the particulars required to be registered concerning the death;
(b)any person present at the death;
(c)the executor or administrator of the deceased's estate;
(d)the occupier, at the time of the death, of the premises in which the death, to the knowledge of the occupier, occurred;
(e)the person finding the body;
(f)the person taking charge of the body;
(g)the person procuring the disposal of the body.
(5) It shall, subject to paragraphs (6) and (7) and to Article 26, be the duty—
(a)of each such relative as is mentioned in paragraph (4)( a); or
(b)if there is no such relative as is mentioned in paragraph (4)( a), of each such person mentioned in paragraph (4)( b); or
(c)if there is no such relative or person as is mentioned in paragraph 4( a) and ( b) of each person mentioned in paragraph (4)( c), ( d), ( e), ( f) and ( g);
to give to the registrar, before the expiration of a period of five days from the date of a death, information to the best of his knowledge and belief, of the particulars (other than the cause of the death) required to be registered concerning the death, and to sign the register in the presence of the registrar.
(6) Where any qualified informant gives the required information concerning a death and signs the register every other qualified informant shall cease to be under a duty to do so.
(7) Where a coroner receives any notification or notice under section 7 or 8 of the Coroners Act (Northern Ireland) 1959 [1959 c.15] in respect of the death of any person or a coroner has been informed of the death of any person and there is reasonable ground to believe that the person has died as the result of an industrial disease of the lungs, paragraph (5) shall have effect as if the words "before the expiration of a period of five days from the date of a death" were omitted.
(8) Where the Registrar General is satisfied, after such inquiry as he thinks necessary, that the correct particulars concerning a death are available, he may authorise the registration of the death even if the information is not given by a qualified informant.
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Taree Real Estate. Taree Stock & Station Agents. Taree Property Listings. Buying Property in Taree. Selling Property in Taree. Property For Sale in Taree. Property For Rent in Taree. Realtors in Taree. Houses For Sale in Taree. Houses For Rent in Taree. Properties For Sale in Taree. Properties For Rent in Taree. Rural Properties in Taree. Business for sale in Taree. Businesses for sale in Taree. Wingham Real Estate Agents. Wingham Real Estate. Wingham Stock & Station Agents. Wingham Property Listings. Buying Property in Wingham. Selling Property in Wingham. Property For Sale in Wingham. Property For Rent in Wingham. Realtors in Wingham. Houses For Sale in Wingham. Houses For Rent in Wingham. Properties For Sale in Wingham. Properties For Rent in Wingham. Rural Properties in Wingham. Business for sale in Wingham. Businesses for sale in Wingham. Forster Real Estate Agents. Forster Real Estate. Forster Stock & Station Agents. Forster Property Listings. Buying Property in Forster. Selling Property in Forster. Property For Sale in Forster. Property For Rent in Forster. Realtors in Forster. Houses For Sale in Forster. Houses For Rent in Forster. Properties For Sale in Forster. Properties For Rent in Forster. Rural Properties in Forster. Business for sale in Forster. Businesses for sale in Forster. Tuncurry Real Estate Agents. Tuncurry Real Estate. Tuncurry Stock & Station Agents. Tuncurry Property Listings. Buying Property in Tuncurry. Selling Property in Tuncurry. Property For Sale in Tuncurry. Property For Rent in Tuncurry. Realtors in Tuncurry. Houses For Sale in Tuncurry. Houses For Rent in Tuncurry. Properties For Sale in Tuncurry. Properties For Rent in Tuncurry. Rural Properties in Tuncurry. Business for sale in Tuncurry. Businesses for sale in Tuncurry. Nabiac Real Estate Agents. Nabiac Real Estate. Nabiac Stock & Station Agents. Nabiac Property Listings. Buying Property in Nabiac. Selling Property in Nabiac. Property For Sale in Nabiac. Property For Rent in Nabiac. Realtors in Nabiac. Houses For Sale in Nabiac. Houses For Rent in Nabiac. Properties For Sale in Nabiac. Properties For Rent in Nabiac. Rural Properties in Nabiac. Business for sale in Nabiac. Businesses for sale in Nabiac.
Manning & Great Lakes CBD
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Finally! A large unattractive puffa style jacket with GPS tracking is on the market. The io-Jacket not only includes an integrated MP3 player and Bluetooth hookup (because clearly a handbag is now obsolete) but also means I can be tracked wherever I am. The new technology means even my movements inside a building are no longer private. Lodenfrey's wearable electronic jacket may seem like the togs of tomorrow, but while the styling and price remain ridiculous it's not going to make it onto our wish list.
From 4,700 Euros at Lodenfrey
[ via Talk2myshirt]Related Posts: Camping gadgets/ | Burton motorola Audex Dutchess Jacket
By Zara Rabinowicz | April 25th, 2007


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These cupcakes are perfect for wine lovers. They contain a unique Riesling grape seed flour and Riesling oil – both specialty items – and some Riesling wine. What does this mean? That these treats are an adults-only goodie! The batter also has numerous other more-traditional ingredients, so they are, indeed, cupcakes, not just "winecakes." The frosting is a pear mascarpone that is topped with chopped walnuts before serving. Tasty and different – you can't beat that combination!
Source Cupcake Project
Riesling Cupcakes with Pear Mascarpone Frosting (Gluten-Free Cupcakes)
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King of the ice road
Trucker star Alex Debogorski's funny, brash personality adds a warm glow to 'IRT's frigid setting and continues to pave new avenues of opportunity.
New 'Ice Road' premiers June 3 sans Kelly, Sieber
The sixth season of the History Channel's Ice Road Truckers series will feature drivers of the Dalton and Manitoba.
Ice Road Truckers season 5 DVDs available
A set of DVDs with the entire season 5 of History Channel's "Ice Road Truckers" franchise is now available via History's website. The season pit the Canucks against the Americans, with a crew of haulers ...
Truckers lobbied to support National Pork Rind Day
This wouldn't be the salty snack's first appearance on the Channel 19 blog. For that, we'd have to go back to August 2010, when a driver choked on one and his rig left the roadway ...
Tonight! Live video chat with 'Ice Road' star
"Ice Road Truckers" star Maya Sieber will join Truckers News for a live chat and video session Sept. 22 at 9 p.m. EST.
Aug. 27: Chill with an Ice Road Trucker
Ice Road Trucker Maya Sieber will be available for photos and autographs at the Great American Trucking Show in Dallas.
'Ice Road' star to appear at GATS
Maya Sieber and "Deadliest Catch" fisherman Edgar Hansen will appear at the Great American Trucking Show.
Roadside Attractions
An outlaw is riding into cowboy country, there's a new dame on the Dalton, tornadoes take down some rigs, truckers say not to human freight and other industry news items are featured.


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Though this recipe is protein free, there are plenty of sustaining calories from the cream. It will whip together so fast they'll hardly have time to ask when it's will be ready.
Berry Fool
6 servings
2 cups Heavy whipping cream
2 T xylitol or coconut sugar
10 drops vanilla creme stevia
1 t vanilla
2 c berries
mint leaves for garnish - optional
Whip cream til frothy ( about a minute) then add sweetner and vanilla.
Gently fold in rinsed berries and garnish with mint leaves.
We like blackberry fool the best - the tartness of the blackberries balances the sweet cream nicely. And for the record - not a single one of them ate the mint leaves, though they did lick the cream off off them...
Prepare to hear this comment float around the table as they gobble it down, "This is the best thing you've ever made!"
linked to Designs by Gollum, Kelli, Rachel, Jen, Laura, Kristen


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When President Obama came to Massachusetts to rally the troops for Martha Coakley Sunday, he had little to say about health care. That was curious, considering that the White House needs Coakley to keep his filibuster-proof Senate intact so the health care bill makes it to the finish line. It's also puzzling considering that for weeks health care has been Topic Numero Uno, and the president has been working behind the scenes to shape the legislation.
In his remarks, the president noted that Coakley as attorney general had gone after big insurance companies that misled people into buying coverage, only to deny it when they got sick. Later in his talk, he told the crowd that when it comes to taking on the worst practices of insurance companies that routinely deny Americans the care they need, she's going to be on your side. That was pretty much it. No mention of how Massachusetts reform became the model for national legislation; no mention of the state's high cost of medical care; no mention that many residents have dropped coverage because they can't afford it and are willing to take the penalty; no mention that small businesses are struggling mightily to pay their premiums.
It's not unreasonable for Massachusetts residents to want their U.S. senator to be on their side, especially when it comes to the state's soaring cost of health care—an issue simmering beneath the surface, even if it hasn't quite bubbled over as a major issue, in Coakley's campaign against Republican Scott Brown. "Small businesses are mad as hell," says Jon Hurst, who runs the Retailers Association of Massachusetts, a trade group of some 3000 firms. "This is by far the worst year we've seen since the [reform] law has gone into effect." Hurst is talking about the double-digit insurance rate increases his members are seeing in renewal envelopes. The premiums for his own five employees have jumped up thirty-three percent. The next logical step, he says, is a high deductible policy to bring down the price.
Bruce Derosier owns a fitness center in Spencer, a town of about 13,000 in the middle of the state. The premium for his individual policy was affordable at $1,800 nine years ago, but the $9,100 he pays now is not. His agent found him a similar Blue Cross policy for about $6,000 a year, but warned him it was an introductory offer and that the price could go up next year.
Bob Cirba, a painting contractor from Spencer, and his wife, Joy, just got word from their agent that Blue Cross was increasing their premium from $1,002 to $1,594, a 59 percent hike. And that's for an HMO with a deductible of $1,000 for each family member. "It's not realistic that a family of four in middle America can come up with over $1,500 a month just for health insurance," Joy said. They are weighing their options. In western Massachusetts, Terry Carlo and her husband weighed theirs, and last month dropped their policy when the premiums rose thirty percent. Says Hurst: "Providers have gone unchecked because the insurers are more or less working for providers not subscribers. A year after the handshake we've made no progress, and that's discouraging."
A few days before the president's visit to Boston, Christy Mihos, a Republican candidate for the governor's race next fall, issued a press release that got little attention, but asked a crucial question: What happened to the attorney general's investigation of Partners HealthCare, the state's biggest health system, and Blue Cross Blue Shield, the state's biggest insurance company?
A year ago, the Boston Globe reported that the attorney general was probing whether Partners and Blue Cross "may have illegally colluded to increase the price of health insurance statewide over the last nine years." The AG's investigation was in response to an in-depth Globe report from late December 2008 that described a handshake agreement between Partners and Blue Cross which, the Globe said, resulted in Blue Cross raising "the rate it pays Partners by 75 percent since 2000." Partners also pressured the state's other big insurers to offer similarly large increases that were passed on to policyholders. "There's still no public word. Why the delay?" Mihos asked.
It's not clear whether or how often Coakley's investigation has come up during the campaign, but it appears there is no resolution. In late November, the Globe reported that "no court action has been taken" in the Partners case, and it noted that Coakley had received an endorsement from Partners chairman Jack Connors Jr. A campaign spokesman told the paper that Connors's support had no impact on her decisions as attorney general. We called Coakley's campaign to ask about disposition of the investigation, but no one returned our call.


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We will be giving away 5 gift cards every week beginning the week of October 5, 2014 and ending the week of March 1, 2015. Four of these gift cards will be valued at $25 and one at $50. That is 110 gift cards in all!
These giveaways are in partnership with the Lufthansa Group: Lufthansa, Austrian, Brussels Airlines, and SWISS.
There are three easy ways to get an entry in the drawings (No purchase necessary to win):


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Roger Schieferecke
Roger Schieferecke left Fort Hays State University for better positions twice.
He said he always looked forward to coming back and got that opportunity in 2010 when the university created an associate director's position for the Kansas Academy of Mathematics and Science.
"I had never left western Kansas," said Schieferecke, who was born and raised in Norton. "Sometimes you don't realize what you have until you leave."
Schieferecke, who has bachelor's and master's degrees in communication from FHSU and has worked in admissions twice at his alma mater, received his doctorate degree in adult and higher education from the University of South Dakota in December 2009 and was looking for a job when he heard of the new position at KAMS.
"When the opportunity arose to come back for a third time," he said, "I jumped all over it."


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Commonwealth Bank's culture wars
PUBLISHED: 11 Jul 2014 05:13:53 | UPDATED: 12 Jul 2014 02:49:01PUBLISHED: 11 Jul 2014 PRINT EDITION: 11 Jul 2014The challenge for the executive team at CBA is imposing the checks and balances to shore up the public's confidence while maintaining the bank's successful performance-based culture. Photo: James Alcock
James Eyers
When the Commonwealth Bank of Australia first opened for business in 1912, its inaugural chief executive Denison Miller looked after a dozen staff from a single branch on Collins Street in Melbourne. The current chief executive Ian Narev, and his key lieutenants – 102 years later – oversee 51,000 staff and 1155 branches under a brand that is ingrained in the national psyche.
CBA is the second-largest company on the Australian Securities Exchange. It has a market capitalisation of $130 billion, assets of $780 billion and 10 million customers. Its stock has surged to record highs this year.
But the shining performance of CBA on the stock market is being tempered by smears on its reputation. On June 26, a Senate committee found the bank had underpaid victims after financial planners put risk-adverse clients into inappropriate investments that blew up during the financial crisis, and that it had sought to avoid regulatory scrutiny and cover up the planners' misconduct.
The saga at CBA subsidiaries Financial Wisdom and Commonwealth Financial Planning has also shone a light on the incentives paid to planners at a time when the federal government will bolster disclosure and remove commissions through the Future of Financial Advice reforms.
The tardiness with which the bank and the Australian Securities and Investments Commission followed up on complaints about the negligent advice has also brought CBA's culture into question. It is CBA's performance-driven strategy since the bank's privatisation two decades ago that has helped drive the bank's stellar reception in the market but also sowed the seeds for the current scandal.
During its period of transformation, CBA had only three chief executives: David Murray, who became chief executive in 1992, the year after privatisation began; Ralph Norris, who took over from Murray in 2005; and Narev, who took the top job in December 2011.
Each chief has presided over steep growth in shareholder returns, helped by favourable macro economic conditions, as Australia's long period of low interest rates lit a fire under home lending markets. But profound cultural and organisational changes started by Murray transformed CBA from a highly unionised and hopelessly uncompetitive bank into a competitive institution driven by a sales culture. When he took over, Norris continued to entrench performance values.
Narev inherits highs and failures
Narev, who took the reins in 2011, has both predecessors to thank for CBA's technological supremacy and competitive culture but he is also mopping up the failures from their watch. His executive team was put under further pressure in May after it was revealed the bank and the corporate regulator had misled the Senate about details of their compensation scheme. These developments "have only deepened the committee's misgivings about the integrity and fairness of the process," concluded last month's Senate report, which included the threat of a royal commission.
CBA insists it has overhauled its management, introduced proper training and removed inappropriate incentives. After entering into an enforceable undertaking with ASIC in 2011, the bank has also spent more than $25 million on new technology to supervise and monitor its financial advisers.
For now, the market has not penalised the bank for its oversights in wealth management, currently led by Annabel Spring. Hard-headed analysts say the $51 million in compensation CBA has paid out is immaterial compared to its overall financial performance (net profit of $7.7 billion for 2013). "Where there have been issues, they have been dealt with openly and to the satisfaction of securities regulators," says Credit Suisse analyst James Ellis.
But the fallout from the Senate report threatens to unsettle the bank's retail customers, especially those looking for advice on how to safeguard their retirements.
CBA is adamant its travails have been caused by a few bad apples, but the "vertically integrated" model – where one part of the bank offers products and services that are "cross sold" to existing customers – creates an environment where mis-selling can continue.
While FoFA has banned commissions for financial advisers, banks can still pay performance bonuses for directing customers into particular products. The challenge for the executive team at CBA is imposing the checks and balances to shore up the public's confidence while maintaining the bank's successful performance-based culture.
Read more
People | Ian Narev, Ralph Norris |
Topics | Financial Services Industry /Banking & Finance |


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You Want a Suit That's the Business—Not a Business Suit
Hip-hop sensation Drake has never had an office job. But that hasn't stopped him from being young and moneyed. When he wears a suit, it's to hit the club. To unleash the hidden after-dark power of your own power suit, know what rules to break
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- Wear it Now,
- Style Bible,
- Drake,
- Suits
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