Attached files
Exhibit 99.1
Data and Consulting Services Division of Schlumberger Technology Corporation |
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Two Robinson Plaza, Suite 200 6600 Steubenville Pike Pittsburgh, PA 15205-1017 Tel: 412-787-5403 Fax: 412-787-2906 |
15 February, 2010
Quicksilver Resources, Inc.
777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
Dear Gentlemen:
At the request of Quicksilver Resources, Inc. (QRI), through their letter of engagement, Data &
Consulting Services (DCS) Division of Schlumberger Technology Corporation has evaluated the proved
reserves of certain QRI oil and gas interests located in the United States (US) as of 31 December
2009. The evaluated properties are located in Colorado, Montana, Texas, and Wyoming. This report
was completed as of the date of this letter and has been prepared using constant prices and costs
and conforms to our understanding of the U.S. Securities and Exchange Commission (SEC) guidelines
and applicable financial accounting rules. All prices, costs, and cash flow estimates are
expressed in US dollars (US$). It is our understanding that the properties evaluated by DCS
comprise one hundred percent (100%) of QRIs proved reserves located in the US and comprise
approximately ninety percent (90%) of QRIs total proved reserves. We believe that the assumptions,
data, methods, and procedures used in preparing this report are appropriate for the purpose of this
report. The Lead Evaluator for this evaluation was Charles M. Boyer II, PG, CPG, and his
qualifications, independence, objectivity, and confidentiality meet the requirements set forth in
the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information
promulgated by the Society of Petroleum Engineers.
Table 1 summarizes the estimates of the net reserves and future net revenue, as of 31 December
2009, for the QRI US evaluated properties. Unescalated prices and costs were used for all
properties contained in this evaluation.
Table 1
Estimated Net Reserves And Future Net Revenue
Certain Proved Oil And Gas Interests
Quicksilver Resources, Inc.
United States Producing Properties
As Of 31 December 2009
Certain Proved Oil And Gas Interests
Quicksilver Resources, Inc.
United States Producing Properties
As Of 31 December 2009
Proved | Proved | Proved | Total | |||||||||||||
Producing | Nonproducing | Undeveloped | Proved | |||||||||||||
Reserves | Reserves | Reserves | Reserves | |||||||||||||
Remaining Net Reserves | ||||||||||||||||
Oil, MBbls |
1,863.3 | 603.4 | 391.4 | 2,858.0 | ||||||||||||
Gas, MMscf |
636,332.4 | 407,807.2 | 511,894.3 | 1,556,034.0 | ||||||||||||
NGL, MBbls |
50,150.3 | 10,846.2 | 37,264.9 | 98,261.4 | ||||||||||||
Income Data (M$) | ||||||||||||||||
Future Net Revenue |
3,474,639.8 | 1,644,471.0 | 2,668,310.5 | 7,787,422.0 | ||||||||||||
Future Net Cashflow |
1,493,605.4 | 610,957.2 | 574,400.9 | 2,678,963.8 | ||||||||||||
Discounted PV @ 10% (M$) |
765,019.1 | 235,575.0 | 2,933.9 | 1,003,528.1 |
Data & Consulting Services Division of Schlumberger Technology Corporation |
15 February, 2010
Page 2
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Values in the tables of this report may not add up arithmetically due to rounding procedure in
the computer software program used to prepare the economic projections. All hydrocarbon liquids
are reported as 42 gallon barrels. Gas volumes are reported at the standard pressure and
temperature bases of the area where the gas is sold.
We are independent with respect to QRI as provided in the SEC regulations. Neither the employment
of nor the compensation received by DCS was contingent upon the values estimated for the properties
included in this report.
Oil and gas reserves by definition fall into one of the following categories: proved, probable,
and possible. The proved category is further divided into: developed and undeveloped. The
developed reserve category is even further divided into the appropriate reserve status
subcategories: producing and non-producing. Non-producing reserves include shut-in and
behind-pipe reserves. The reserves included in this report include only proved reserves and do not
include probable or possible reserves. QRI has an active exploration and development program to
develop their interests in certain tracts not classified as proved at this time. Future drilling
may result in the reclassification of additional volumes to the proved reserve category. However,
changes in the regulatory requirements for oil and gas operations may impact future development
plans and the ability of the company to recover the estimated proved undeveloped reserves. The
reserves and income attributable to the various reserve categories included in this report have not
been adjusted to reflect the varying degrees of risk associated with them.
Reserve estimates are strictly technical judgments. The accuracy of any reserve estimate is a
function of the quality and quantity of data available and of the engineering and geological
interpretations. The reserve estimates presented in this report are believed reasonable; however,
they are estimates only and should be accepted with the understanding that reservoir performance
subsequent to the date of the estimate may justify their revision. A portion of these reserves are
for undeveloped locations and producing or non-producing wells that lack sufficient production
history to utilize conventional performance-based reserve estimates. In these cases, the reserves
are based on volumetric estimates and recovery efficiencies along with analogies
to similar producing areas. These reserve estimates are subject to a greater degree of uncertainty
than those based on substantial production and pressure data. As additional production and
pressure data becomes available, these estimates may be revised up or down. Actual future prices
may vary significantly from the prices used in this evaluation; therefore, future hydrocarbon
volumes recovered and the income received from these volumes may vary significantly from those
estimated in this report. The present worth is shown to indicate the effect of time on the value
of money and should not be construed as being the fair market value of the properties.
Standard geological and engineering methods generally accepted by the petroleum industry were used
in the estimation of QRIs reserves. Deterministic methods were used for all reserves included in
this report. The appropriate combination of conventional decline curve analysis (DCA), production
data analysis, volumetrics, reservoir simulation, and type curves were used to estimate the
remaining reserves in the various producing areas. Volumetric calculations were based on data and
maps provided by QRI. Any reservoir simulation efforts were conducted using EclipseTM,
which is DCSs multi-phase reservoir simulator designed specifically for evaluating fractured shale
formations. Comparisons were made to similar properties for which more complete data were
available for areas of new development.
Data & Consulting Services Division of Schlumberger Technology Corporation |
15 February, 2010
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All prices used in preparation of this report were based on the twelve month unweighted arithmetic
average of the first day of the month price for the period January through December 2009. The
resulting Henry Hub gas price used was $3.870/MMBtu and the resulting West Texas Intermediate oil
price used was $61.18/Bbl. The prices were adjusted for local differentials, gravity and Btu where
applicable. As required by SEC guidelines, all pricing was held constant for the life of the
projects (no escalation).
Operating costs used in this report were based on values reported by QRI and reviewed by DCS.
Well costs include direct expenses, allocated general and administrative overhead (G&A), production
taxes, marketing, transportation, and compression charges. QRIs estimates for capital costs for
all non-producing and undeveloped wells are included in the evaluation. QRI has indicated to us
that they have the ability and intent to implement their capital expenditure program as scheduled.
Operating costs and capital costs were held constant for the life of the projects (no escalation).
Net revenue (sales) is defined as the total proceeds from the sale of oil, condensate, natural gas
liquids (NGL), and gas adjusted for commodity price basis differential and gathering/
transportation expense. Future net income (cashflow) is future net revenue less net lease
operating expenses, state severance or production taxes, operating/development capital expenses and
net salvage. Future net income (cashflow) for nonoperated wells includes those general and
administrative (G&A) deductions charged by the operator for a particular well or project on a
monthly basis; operated well G&A deductions include only those expenses estimated as necessary to
continue production activities. Future plugging, abandonment, and
salvage costs are included at the economic life of each well or unit. No provisions for State or
Federal income taxes have been made in this evaluation. The present worth (discounted cashflow) at
various discount rates is calculated on a monthly basis.
In the conduct of our evaluation, we have not independently verified the accuracy and completeness
of information and data furnished by QRI with respect to ownership interests, historical gas
production, costs of operation and development, product prices, payout balances, and agreements
relating to current and future operations and sales of production. If in the course of our
examination something came to our attention which brought into question the validity or sufficiency
of any of the information or data provided by QRI, we did not rely on such information or data
until we had satisfactorily resolved our questions relating thereto or independently verified such
information or data.
In our opinion the above-described estimates of QRIs proved reserves and supporting data are, in
the aggregate, reasonable and have been prepared in accordance with generally accepted petroleum
engineering and evaluation principles. It is also our opinion that the above-described estimates of
QRIs proved reserves conform to the definitions of proved oil and gas reserves promulgated by the
SEC. These reserves definitions are provided at the conclusion of this letter.
All data used in this study were obtained from QRI, public industry information sources, or the
non-confidential files of DCS. A field inspection of the properties was not made in connection
with the preparation of this report. The potential environmental liabilities attendant to
ownership and/or operation of the properties have not been addressed in this report. Abandonment
and clean-up costs and possible salvage value of the equipment were considered in this report.
Data & Consulting Services Division of Schlumberger Technology Corporation |
15 February, 2010
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In evaluating the information at our disposal related to this report, we have excluded from
our consideration all matters which require a legal or accounting interpretation, or any
interpretation other than those of an engineering or geological nature. In assessing the
conclusions expressed in this report pertaining to all aspects of oil and gas evaluations,
especially pertaining to reserve evaluations, there are uncertainties inherent in the
interpretation of engineering data, and such conclusions represent only informed professional
judgments.
This report was prepared solely for the use of the party to whom it is addressed and any disclosure
made of this report and/or the contents by said party thereof shall be solely the responsibility of
said party and shall in no way constitute any representation of any kind whatsoever of the
undersigned with respect to the matters being addressed.
Data and worksheets used in the preparation of this evaluation will be maintained in our files in
Pittsburgh and will be available for inspection by anyone having proper authorization from QRI.
Sincerely yours,
/s/ Denise L. Delozier
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/s/ Charles M. Boyer
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Senior Engineer
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Scientific Advisor | |||||
Unconventional Reservoirs | ||||||
/s/ Walter K. Sawyer
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/s/ Jeron R. Williamson
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Principal Consultant
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Senior Engineer |