Attached files
file | filename |
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10-K - FORM 10-K - MARINER ENERGY INC | h69856e10vk.htm |
EX-12 - EX-12 - MARINER ENERGY INC | h69856exv12.htm |
EX-21 - EX-21 - MARINER ENERGY INC | h69856exv21.htm |
EX-31.2 - EX-31.2 - MARINER ENERGY INC | h69856exv31w2.htm |
EX-23.2 - EX-23.2 - MARINER ENERGY INC | h69856exv23w2.htm |
EX-32.1 - EX-32.1 - MARINER ENERGY INC | h69856exv32w1.htm |
EX-32.2 - EX-32.2 - MARINER ENERGY INC | h69856exv32w2.htm |
EX-31.1 - EX-31.1 - MARINER ENERGY INC | h69856exv31w1.htm |
EX-23.1 - EX-23.1 - MARINER ENERGY INC | h69856exv23w1.htm |
EX-10.24 - EX-10.24 - MARINER ENERGY INC | h69856exv10w24.htm |
EX-10.23 - EX-10.23 - MARINER ENERGY INC | h69856exv10w23.htm |
Exhibit 99.1
MARINER ENERGY, INC.
Estimated
Future Reserves and Income
Attributable to Certain
Leasehold and Royalty Interests
SEC Parameters
As of
December 31, 2009
/s/ Edward J. Gibbon
Edward J. Gibbon, P.E.
TBPE License No. 52750
Senior Vice President
TBPE License No. 52750
Senior Vice President
RYDER SCOTT COMPANY, L.P.
TBPE Firm License No. F-1580
TBPE Firm License No. F-1580
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
TBPE REGISTERED ENGINEERING FIRM F-1580 | FAX (713) 651-0849 | |||
1100 LOUISIANA SUITE 3800 | HOUSTON, TEXAS 77002-5218 | TELEPHONE (713) 651-9191 |
February 1, 2010
Mariner Energy, Inc.
2000 W. Sam Houston Parkway South
Suite 2000
Houston, Texas 77042-3622
2000 W. Sam Houston Parkway South
Suite 2000
Houston, Texas 77042-3622
Gentlemen:
At your request, we have prepared an estimate of the proved reserves, future production, and
income attributable to certain leasehold and royalty interests of Mariner Energy, Inc. (Mariner) as
of December 31, 2009. The subject properties are located in the states of Alabama, Arkansas,
Louisiana, Michigan, Mississippi, New Mexico, and Texas; in the state waters offshore Louisiana and
Texas; and in the federal waters offshore Florida, Louisiana, and Texas. The reserves and income
data were estimated based on the definitions and disclosure guidelines contained in the United
States Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of
Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC
regulations). The results of our third party study, completed on February 1, 2010, are presented
herein. The properties reviewed by Ryder Scott represent 100 percent of the total net proved liquid
hydrocarbon reserves and 100 percent of the total net proved gas reserves of Mariner.
The estimated reserves and future net income amounts presented in this report, as of December
31, 2009, are related to hydrocarbon prices. The hydrocarbon prices used in the preparation of
this report are based on the average prices during the 12-month period prior to the ending date of
the period covered in this report, determined as unweighted arithmetic averages of the prices in
effect on the first-day-of-the-month for each month within such period, unless prices were defined
by contractual arrangements as required by the SEC regulations. Actual future prices may vary
significantly from the prices required by SEC regulations; therefore, volumes of reserves actually
recovered and the amounts of income actually received may differ significantly from the estimated
quantities presented in this report. The results of this study are summarized below.
SEC PARAMETERS
Estimated Net Reserves and Income Data
Certain Leasehold and Royalty Interests of
Mariner Energy, Inc.
As of December 31, 2009
Estimated Net Reserves and Income Data
Certain Leasehold and Royalty Interests of
Mariner Energy, Inc.
As of December 31, 2009
Proved | ||||||||||||||||
Developed | Total | |||||||||||||||
Producing | Non-Producing | Undeveloped | Proved | |||||||||||||
Net Remaining Reserves |
||||||||||||||||
Oil/Condensate Barrels |
22,182,961 | 9,280,305 | 21,001,842 | 52,465,108 | ||||||||||||
Plant Products Barrels |
17,429,676 | 2,694,628 | 13,360,078 | 33,484,382 | ||||||||||||
Gas MMCF |
263,841 | 143,004 | 164,591 | 571,436 | ||||||||||||
Income Data |
||||||||||||||||
Future Gross Revenue |
$ | 2,648,174,750 | $ | 1,132,664,329 | $ | 2,122,729,000 | $ | 5,903,568,079 | ||||||||
Deductions |
1,207,597,398 | 558,057,336 | 1,463,012,375 | 3,228,667,109 | ||||||||||||
Future Net Income (FNI) |
$ | 1,440,577,352 | $ | 574,606,993 | $ | 659,716,625 | $ | 2,674,900,970 | ||||||||
Discounted FNI @ 10% |
$ | 900,920,312 | $ | 449,118,773 | $ | 152,155,094 | $ | 1,502,194,179 |
1200, 530 8TH AVENUE, S.W.
|
CALGARY, ALBERTA T2P 3S8 | TEL (403) 262-2799 | FAX (403) 262-2790 | |||
621 17TH STREET, SUITE 1550 | DENVER, COLORADO 80293-1501 | TEL (303) 623-9147 | FAX (303) 623-4258 |
Mariner
Energy,
Inc.
February 1, 2010
Page 2
February 1, 2010
Page 2
Liquid hydrocarbons are expressed in standard 42 gallon barrels. All gas volumes are reported
on an as sold basis expressed in millions of cubic feet (MMCF) at the official temperature and
pressure bases of the areas in which the gas reserves are located.
The estimates of the reserves, future production, and income attributable to properties in
this report were prepared using the economic software package AriesTM System Petroleum
Economic Evaluation Software, a copyrighted program of Halliburton. The program was used at the
request of Mariner. Ryder Scott has found this program to be generally acceptable, but notes that
certain summaries and calculations may vary due to rounding and may not exactly match the sum of
the properties being summarized. Furthermore, one line economic summaries may vary slightly from
the more detailed cash flow projections of the same properties, also due to rounding. The rounding
differences are not material.]
The future gross revenue is after the deduction of production taxes. The deductions are
comprised of the normal direct costs of operating the wells, ad valorem taxes, recompletion costs,
development costs, and certain abandonment costs net of salvage. The future net income is before
the deduction of state and federal income taxes and general administrative overhead, and has not
been adjusted for outstanding loans that may exist nor does it include any adjustment for cash on
hand or undistributed income. Liquid hydrocarbon reserves account for approximately 67 percent and
gas reserves account for the remaining 33 percent of total future gross revenue from proved
reserves.
The discounted future net income shown above was calculated using a discount rate of 10
percent per annum compounded monthly. Future net income was discounted at four other discount rates
which were also compounded monthly. These results are shown in summary form as follows.
Discounted Future Net Income | ||||
As of December 31, 2009 | ||||
Discount Rate | Total | |||
Percent | Proved | |||
5 |
$ | 1,901,758,800 | ||
15 |
$ | 1,255,362,900 | ||
20 |
$ | 1,084,799,100 | ||
25 |
$ | 958,346,600 |
The results shown above are presented for your information and should not be construed as
our estimate of fair market value.
Reserves Included in This Report
The proved reserves included herein conform to the definition as set forth in the Securities
and Exchange Commissions Regulations Part 210.4-10 (a). An abridged version of the SEC reserves
definitions from 210.4-10(a) entitled Petroleum Reserves Definitions is included as an attachment
to this report.
The various reserve status categories are defined under the attachment entitled Petroleum
Reserves Definitions in this report. The developed non-producing reserves included herein consist
of the shut-in and behind pipe categories.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Mariner Energy, Inc.
February 1, 2010
Page 3
February 1, 2010
Page 3
No attempt was made to quantify or otherwise account for any accumulated gas production
imbalances that may exist. At Mariners request, the volumes of proved gas reserves presented in
this report for certain offshore properties include Mariners net share of fuel gas used on the
platform. For those properties, the operating expense was increased to reflect an economic offset
to the revenues from the fuel gas, and the additional cost was calculated as though an equal amount
of gas had been purchased for use as fuel. The total net proved reserves of fuel gas included in
this report are estimated to be 7,012 MMcf.
While it may reasonably be anticipated that the future prices received for the sale of
production and the operating costs and other costs relating to such production may also increase or
decrease from existing levels, such changes were, in accordance with rules adopted by the SEC,
omitted from consideration in making this evaluation.
Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to be economically
producible from a given date forward. Moreover, estimates of
reserves may increase or decrease as a result of future operations, effects of regulation by
governmental agencies or geopolitical risks. As a result, the estimates of oil and gas reserves
have an intrinsic uncertainty. The reserves included in this report are therefore estimates only
and should not be construed as being exact quantities. They may or may not be actually recovered,
and if recovered, the revenues therefrom and the actual costs related thereto could be more or less
than the estimated amounts.
Mariners operations may be subject to various levels of governmental controls and
regulations. These controls and regulations may include matters relating to land tenure, drilling,
production practices, environmental protection, marketing and pricing policies, royalties, and
various taxes and levies including income tax, and are subject to change from time to time. Such
changes in governmental regulations and policies may cause volumes of reserves actually recovered
and amounts of income actually received to differ significantly from the estimated quantities.
The estimates of reserves presented herein were based upon a detailed study of the properties
in which Mariner owns an interest; however, we have not made any field examination of the
properties. No consideration was given in this report to potential environmental liabilities that
may exist nor were any costs included for potential liability to restore and clean up damages, if
any, caused by past operating practices.
Estimates of Reserves
The reserves for the properties included herein were estimated by performance methods or the
volumetric method. In general, reserves attributable to producing wells and/or reservoirs were
estimated by performance methods such as decline curve analysis, material balance and/or reservoir
simulation which utilized extrapolations of historical production and pressure data available
through December, 2009 in those cases where such data were considered to be definitive. In certain
cases, producing reserves were estimated by the volumetric method where there were inadequate
historical performance data to establish a definitive trend and where the use of production
performance data as a basis for the reserve estimates was considered to be inappropriate. Certain
reserves attributable to non-producing and undeveloped reservoirs included herein were estimated by
the volumetric method which utilized all pertinent well and seismic data available through
December, 2009. Approximately 40% of the reserves included herein were estimated using the
volumetric method. We utilized all methods and procedures that we deemed necessary to estimate
Mariners proved reserves, and we affirm that those methods and procedures were appropriate for
this purpose.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Mariner Energy, Inc.
February 1, 2010
Page 4
February 1, 2010
Page 4
To estimate economically recoverable oil and gas reserves and related future net cash flows,
we consider many factors and assumptions including, but not limited to, the use of reservoir
parameters derived from geological, geophysical and engineering data which cannot be measured
directly, economic criteria based on current costs and SEC pricing requirements, and forecasts of
future production rates. Under the SEC
regulations 210.4-10(a)(22)(v) and (26), proved reserves must be demonstrated to be economically
producible based on existing economic conditions including the prices and costs at which economic
producibility from a reservoir is to be determined as of the effective date of the report. Mariner
has informed us that they have furnished us all of the accounts, records, geological and
engineering data, and reports and other data required for this investigation. In preparing our
forecast of future production and income, we have relied upon data furnished by Mariner with
respect to property interests owned, production and well tests from examined wells, normal direct
costs of operating the wells or leases, other costs such as transportation and/or processing fees,
ad valorem and production taxes, recompletion and development costs, abandonment costs after
salvage, product prices based on the SEC regulations, geological structural and isochore maps, well
logs, core analyses, and pressure measurements. Ryder Scott reviewed such factual data for its
reasonableness; however, we have not conducted an independent verification of the data supplied by
Mariner.
Future Production Rates
Our forecasts of future production rates are based on historical performance from wells now on
production. Test data and other related information were used to estimate the anticipated initial
production rates for those wells or locations that are not currently producing. If no production
decline trend has been established, future production rates were held constant, or adjusted for the
effects of curtailment where appropriate, until a decline in ability to produce was anticipated. An
estimated rate of decline was then applied to depletion of the reserves. If a decline trend has
been established, this trend was used as the basis for estimating future production rates. For
reserves not yet on production, sales were estimated to commence at an anticipated date furnished
by Mariner.
The future production rates from wells now on production may be more or less than estimated
because of changes in market demand or allowables set by regulatory bodies. Wells or locations that
are not currently producing may start producing earlier or later than anticipated in our estimates.
Hydrocarbon Prices
As previously stated, the hydrocarbon prices used herein are based on the average prices
during the 12-month period prior to the ending date of the period covered in this report,
determined as the unweighted arithmetic averages of the prices in effect on the
first-day-of-the-month for each month within such period, unless prices were defined by contractual
arrangements. For hydrocarbon products sold under contract, the contract prices including fixed and
determinable escalations, exclusive of inflation adjustments, were used until expiration of the
contract. Upon contract expiration, the prices were adjusted to the 12-month unweighted arithmetic
average as previously described. Product prices which were actually used for each property reflect
adjustment for gravity, quality, local conditions, and/or distance from market.
The effects of derivative instruments designated as price hedges of oil and gas quantities are
not reflected in our individual property evaluations.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Mariner Energy, Inc.
February 1, 2010
Page 5
February 1, 2010
Page 5
Costs
Operating costs for the leases and wells in this report are based on the operating expense
reports of Mariner and include only those costs directly applicable to the leases or wells. The
operating costs include a portion of general and administrative costs allocated directly to the
leases and wells. When applicable for operated properties, the operating costs include an
appropriate level of corporate general administrative and overhead costs. The operating costs for
non-operated properties include the COPAS overhead costs that are allocated directly to the leases
and wells under terms of operating agreements. No deduction was made for loan repayments, interest
expenses, or exploration and development prepayments that were not charged directly to the leases
or wells.
Development costs were furnished to us by Mariner and are based on authorizations for
expenditure for the proposed work or actual costs for similar projects. The estimated net cost of
abandonment after salvage was included for offshore properties where abandonment costs net of
salvage was significant. The estimates of the net abandonment costs furnished by Mariner were
accepted without independent verification. Mariners estimates of zero abandonment costs after
salvage value for onshore properties were used in this report. Ryder Scott has not performed a
detailed study of the abandonment costs or the salvage values and makes no warranty for Mariners
estimates.
Because of the direct relationship between volumes of proved undeveloped reserves and
development plans, we include in the proved undeveloped category only reserves assigned to
undeveloped locations that we have been assured will definitely be drilled. Mariner has assured us
of their intent and ability to proceed with the development activities included in this report, and
that they are not aware of any legal, regulatory or political obstacles that would significantly
alter their plans.
Current costs used by Mariner were held constant throughout the life of the properties. |
Standards of Independence and Professional Qualification
Ryder Scott is an independent petroleum engineering consulting firm that has been providing
petroleum consulting services throughout the world for over seventy years. Ryder Scott is employee
owned and maintains offices in Houston, Texas; Denver, Colorado; and Calgary, Alberta, Canada. We
have over eighty engineers and geoscientists on our permanent staff. By virtue of the size of our
firm and the large number of clients for which we provide services, no single client or job
represents a material portion of our annual revenue. We do not serve as officers or directors of
any publicly traded oil and gas company and are separate and independent from the operating and
investment decision-making process of our clients. This allows us to bring the highest level of
independence and objectivity to each engagement for our services.
Ryder Scott actively participates in industry related professional societies and organizes an
annual public forum focused on the subject of reserves evaluations and
SEC regulations. Many of our staff have authored or co-authored technical papers on the subject of
reserves related topics. We encourage our staff to maintain and enhance their professional skills
by actively participating in ongoing continuing education.
Prior to becoming an officer of the Company, Ryder Scott requires that staff engineers and
geoscientists have received professional accreditation in the form of a registered or certified
professional engineers license or a registered or certified professional geoscientists license,
or the equivalent thereof, from an appropriate governmental authority or a recognized
self-regulating professional organization.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Mariner Energy, Inc.
February 1, 2010
Page 6
February 1, 2010
Page 6
We are independent petroleum engineers with respect to Mariner. Neither we nor any of our
employees have any interest in the subject properties and neither the employment to do this work
nor the compensation is contingent on our estimates of reserves for the properties which were
reviewed.
The professional qualifications of the undersigned, the technical person primarily responsible
for reviewing and approving the reserves information discussed in this report, are included as an
attachment to this letter.
Terms of Usage
This report was prepared for the exclusive use and sole benefit of Mariner Energy, Inc. and
may not be put to other use without our prior written consent for such use. The data and work
papers used in the preparation of this report are available for examination by authorized parties
in our offices. Please contact us if we can be of further service.
Very truly yours, RYDER SCOTT COMPANY, L.P. TBPE Firm Registration No. F-1580 |
||||
/s/ Edward J. Gibbon | ||||
Edward J. Gibbon, P.E. | ||||
TBPE License No. 52750 Senior Vice President |
||||
EJG/sm
|
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Professional Qualifications of Primary Technical Person
The conclusions presented in this report are the result of technical analysis conducted by teams of
geoscientists and engineers from Ryder Scott Company, L.P. Mr. Edward J. Gibbon was the primary
technical person responsible for overseeing the estimate of the reserves, future production and
income.
Mr. Gibbon, an employee of Ryder Scott Company L.P. (Ryder Scott) since 2003, is a Senior Vice
President and also serves as an Engineering Group Coordinator responsible for coordinating and
supervising staff and consulting engineers of the company in ongoing reservoir evaluation studies
throughout North America. Before joining Ryder Scott, Mr. Gibbon served in a number of engineering
positions with Tenneco Oil Company, Pogo Producing Company, North Central Oil Corporation, Texas
General Petroleum Corp., IDM Engineering, Inc., Tatham Offshore, Inc., and Harken Energy Corp. For
more information regarding Mr. Gibbons geographic and job specific experience, please refer to the
Ryder Scott Company website at http://www.ryderscott.com/Experience/Employees.php.
Mr. GIbbon earned a Bachelor of Science degree in Petroleum Engineering from the Colorado School of
Mines in 1968 and is a Licensed Professional Engineer in the State of Texas and a Registered
Professional Engineer in the State of Louisiana. He is also a member of the Society of Petroleum
Evaluation Engineers (for which he presently serves as a Director), the Society of Petroleum
Engineers, and the Society of Petrophysicists and Well Log Analysts.
In addition to gaining experience and competency through prior work experience, the Texas Board of
Professional Engineers requires a minimum of fifteen hours of continuing education annually,
including at least one hour in the area of professional ethics, which Mr. Gibbon fulfills. As part
of his 2009 continuing education hours, Mr. Gibbon attended an internally presented 12 hours of
formalized training as well as two presentations at professional society meetings by Dr. John Lee
relating to the definitions and disclosure guidelines contained in the United States Securities and
Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting,
Final Rule released January 14, 2009 in the Federal Register. Mr. Gibbon attended an additional 4
hours of formalized in-house training as well as 32 hours of formalized external training during
2009 covering such topics as the SPE/WPC/AAPG/SPEE Petroleum Resources Management System, reservoir
engineering, geoscience and petroleum economics evaluation methods, procedures and software and
ethics for consultants.
Based on his educational background, professional training and more than 41 years of practical
experience in the estimation and evaluation of petroleum reserves, Mr. Gibbon has attained the
professional qualifications as a Reserves Estimator set forth in Article III of the Standards
Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the
Society of Petroleum Engineers as of February 19, 2007.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
PETROLEUM RESERVES DEFINITIONS
As Adapted From:
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
PREAMBLE
On January 14, 2009, the United States Securities and Exchange Commission (the Commission)
published the Modernization of Oil and Gas Reporting; Final Rule in the Federal Register of
National Archives and Records Administration (NARA). The Modernization of Oil and Gas Reporting;
Final Rule includes revisions and additions to the definition section in Rule 4-10 of Regulation
S-X, revisions and additions to the oil and gas reporting requirements in Regulation S-K, and
amends and codifies Industry Guide 2 in Regulation S-K. The Modernization of Oil and Gas
Reporting; Final Rule, including all references to Regulation S-X and Regulation S-K, shall be
referred to herein collectively as the SEC Regulations. The SEC Regulations take effect with all
filings made with the United States Securities and Exchange Commission as of December 31, 2009, or
after January 1, 2010. Reference should be made to the full text under Title 17, Code of Federal
Regulations, Regulation S-X Part 210, Rule 4-10 (a) for the complete definitions, as the following
definitions, descriptions and explanations rely wholly or in part on excerpts from the original
document (direct passages excerpted from the aforementioned SEC document are denoted in italics
herein).
Reserves are those quantities of petroleum which are anticipated to be commercially recovered
from known accumulations from a given date forward under defined conditions. All reserve estimates
involve some degree of uncertainty. The uncertainty depends chiefly on the amount of reliable
geologic and engineering data available at the time of the estimate and the interpretation of these
data. The relative degree of uncertainty may be conveyed by placing reserves into one of two
principal classifications, either proved or unproved. Unproved reserves are less certain to be
recovered than proved reserves and may be further sub-classified as probable and possible reserves
to denote progressively increasing uncertainty in their recoverability. Under the SEC Regulations
as of December 31, 2009, or after January 1, 2010, a company may optionally disclose estimated
quantities of probable or possible oil and gas reserves in documents publicly filed with the
Commission. The SEC Regulations continue to prohibit disclosure of estimates of oil and gas
resources other than reserves and any estimated values of such resources in any document publicly
filed with the Commission unless such information is required to be disclosed in the document by
foreign or state law as noted in §229.102 (5).
Reserves estimates will generally be revised as additional geologic or engineering data become
available or as economic conditions change.
Reserves may be attributed to either natural energy or improved recovery methods. Improved
recovery methods include all methods for supplementing natural energy or altering natural forces in
the reservoir to increase ultimate recovery. Examples of such methods are pressure maintenance,
cycling, waterflooding, thermal methods, chemical flooding, and the use of miscible and immiscible
displacement fluids. Other improved recovery methods may be developed in the future as petroleum
technology continues to evolve.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
PETROLEUM RESERVES DEFINITIONS
Page 2
Page 2
RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §229.4-10(a) (26) defines reserves as
follows:
Reserves. Reserves are estimated remaining quantities of oil and gas and related substances
anticipated to be economically producible, as of a given date, by application of development
projects to known accumulations. In addition, there must exist, or there must be a reasonable
expectation that there will exist, the legal right to produce or a revenue interest in the
production, installed means of delivering oil and gas or related substances to market, and all
permits and financing required to implement the project.
Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by
major, potentially sealing, faults until those reservoirs are penetrated and evaluated as
economically producible. Reserves should not be assigned to areas that are clearly separated from
a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low
reservoir, or negative test results). Such areas may contain prospective resources (i.e.,
potentially recoverable resources from undiscovered accumulations).
PROVED RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §229.4-10(a) (22) defines proved oil and gas
reserves as follows:
Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas,
which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty
to be economically produciblefrom a given date forward, from known reservoirs, and under existing
economic conditions, operating methods, and government regulationsprior to the time at which
contracts providing the right to operate expire, unless evidence indicates that renewal is
reasonably certain, regardless of whether deterministic or probabilistic methods are used for the
estimation. The project to extract the hydrocarbons must have commenced or the operator must be
reasonably certain that it will commence the project within a reasonable time.
(i) The area of the reservoir considered as proved includes:
(A) The area identified by drilling and limited by fluid contacts, if any, and
(B) Adjacent undrilled portions of the reservoir that can, with reasonable
certainty, be judged to be continuous with it and to contain economically
producible oil or gas on the basis of available geoscience and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited
by the lowest known hydrocarbons (LKH) as seen in a well penetration
unless geoscience, engineering, or performance data and reliable technology establishes a
lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a highest known oil (HKO)
elevation and the potential exists for an associated gas cap, proved oil reserves may be
assigned in the structurally higher portions of the reservoir only if geoscience,
engineering, or performance data and reliable technology establish the higher contact with
reasonable certainty.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
RESERVES DEFINITIONS
Page 3
Page 3
(iv) Reserves which can be produced economically through application of improved
recovery techniques (including, but not limited to, fluid injection) are included in the
proved classification when:
(A) Successful testing by a pilot project in an area of the reservoir with properties no
more favorable than in the reservoir as a whole, the operation of an installed program in
the reservoir or an analogous reservoir, or other evidence using reliable technology
establishes the reasonable certainty of the engineering analysis on which the project or
program was based; and
(B) The project has been approved for development by all necessary parties and
entities, including governmental entities.
(v) Existing economic conditions include prices and costs at which economic producibility
from a reservoir is to be determined. The price shall be the average price during the
12-month period prior to the ending date of the period covered by the report, determined as
an unweighted arithmetic average of the first-day-of-the-month price for each month within
such period, unless prices are defined by contractual arrangements, excluding escalations
based upon future conditions.
[Remainder of this page is left blank intentionally]
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
RESERVES STATUS DEFINITIONS AND GUIDELINES
As Adapted From:
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
and
PETROLEUM RESOURCES MANAGEMENT SYSTEM (SPE-PRMS)
Sponsored and Approved by:
SOCIETY OF PETROLEUM ENGINEERS (SPE),
WORLD PETROLEUM COUNCIL (WPC)
AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS (AAPG)
SOCIETY OF PETROLEUM EVALUATION ENGINEERS (SPEE)
Sponsored and Approved by:
SOCIETY OF PETROLEUM ENGINEERS (SPE),
WORLD PETROLEUM COUNCIL (WPC)
AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS (AAPG)
SOCIETY OF PETROLEUM EVALUATION ENGINEERS (SPEE)
Reserves status categories define the development and producing status of wells and
reservoirs.
DEVELOPED RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §229.4-10(a) (6) defines developed oil and
gas reserves as follows:
Developed oil and gas reserves are reserves of any category that can be expected to be
recovered:
(i) Through existing wells with existing equipment and operating methods or in
which the cost of the required equipment is relatively minor compared to the cost
of a new well; and
(ii) Through installed extraction equipment and infrastructure operational at the
time of the reserves estimate if the extraction is by means not involving a well.
Developed Producing (SPE-PRMS Definitions)
While not a requirement for disclosure under the SEC regulations, developed oil and gas
reserves may be further sub-classified according to the guidance contained in the SPE-PRMS as
Producing or Non-Producing.
Developed Producing Reserves
Developed Producing Reserves are expected to be recovered from completion intervals that
are open and producing at the time of the estimate.
Improved recovery reserves are considered producing only after the improved recovery
project is in operation.
Developed Non-Producing
Developed Non-Producing Reserves include shut-in and behind-pipe reserves.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
RESERVES STATUS DEFINITIONS AND GUIDELINES
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Shut-In
Shut-in Reserves are expected to be recovered from:
(1) | completion intervals which are open at the time of the estimate but which have not yet started producing; | ||
(2) | wells which were shut-in for market conditions or pipeline connections; or | ||
(3) | wells not capable of production for mechanical reasons. |
Behind-Pipe
Behind-pipe Reserves are expected to be recovered from zones in existing wells which will
require additional completion work or future re-completion prior to start of production.
In all cases, production can be initiated or restored with relatively low expenditure
compared to the cost of drilling a new well.
UNDEVELOPED RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §229.4-10(a) (31) defines undeveloped oil
and gas reserves as follows:
Undeveloped oil and gas reserves are reserves of any category that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a relatively
major expenditure is required for recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly offsetting
development spacing areas that are reasonably certain of production when drilled,
unless evidence using reliable technology exists that establishes reasonable
certainty of economic producibility at greater distances.
(ii) Undrilled locations can be classified as having undeveloped reserves only if a
development plan has been adopted indicating that they are scheduled to be drilled
within five years, unless the specific circumstances, justify a longer time.
(iii) Under no circumstances shall estimates for undeveloped reserves be
attributable to any acreage for which an application of fluid injection or other
improved recovery technique is contemplated, unless such techniques have been
proved effective by actual projects in the same reservoir or an analogous
reservoir, as defined in paragraph (a)(2) of this section, or by other evidence
using reliable technology establishing reasonable certainty.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS