Attached files
file | filename |
---|---|
10-K - FORM 10-K - HARVEST NATURAL RESOURCES, INC. | h70116e10vk.htm |
EX-31.1 - EX-31.1 - HARVEST NATURAL RESOURCES, INC. | h70116exv31w1.htm |
EX-32.1 - EX-32.1 - HARVEST NATURAL RESOURCES, INC. | h70116exv32w1.htm |
EX-31.2 - EX-31.2 - HARVEST NATURAL RESOURCES, INC. | h70116exv31w2.htm |
EX-23.3 - EX-23.3 - HARVEST NATURAL RESOURCES, INC. | h70116exv23w3.htm |
EX-23.1 - EX-23.1 - HARVEST NATURAL RESOURCES, INC. | h70116exv23w1.htm |
EX-23.2 - EX-23.2 - HARVEST NATURAL RESOURCES, INC. | h70116exv23w2.htm |
EX-32.2 - EX-32.2 - HARVEST NATURAL RESOURCES, INC. | h70116exv32w2.htm |
EX-21.1 - EX-21.1 - HARVEST NATURAL RESOURCES, INC. | h70116exv21w1.htm |
EX-99.2 - EX-99.2 - HARVEST NATURAL RESOURCES, INC. | h70116exv99w2.htm |
Exhibit 99.1
FAX (303) 623-4258 | ||||||
621 SEVENTEENTH STREET | SUITE 1550 | DENVER, COLORADO | ||||
80293
|
TELEPHONE (303) 623-9147 |
February 26, 2010
Harvest (US) Holdings, Inc.
1177 Enclave Parkway, Suite 300
Houston, Texas, 77077
1177 Enclave Parkway, Suite 300
Houston, Texas, 77077
Attention:
|
Steven Haynes | |
Phil Harries |
Gentlemen:
At your request, we have prepared an estimate of the proved reserves, future production, and
income attributable to certain leasehold of Harvest (US) Holdings, Inc. (Harvest) as of December
31, 2009. The subject properties are located in the state of Utah, in the United States of America
and are in a new geologic basin for Harvest. Optional Probable and Possible volumes are not
reported for this basin due to the ongoing evaluation of assets within these categories. 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
26, 2010, are presented herein. The properties reviewed by Ryder Scott represent 0.5 percent
(0.005) of the total net proved liquid hydrocarbon reserves and 2.2 percent (0.022) of the total
net proved gas reserves of Harvest.
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 on the next page.
1100 LOUISIANA, SUITE 3800HOUSTON, TEXAS 77002-5218 TEL (713) 651-9191 | FAX (713) 651-0849 | |
530 8TH AVENUE, S.W., SUITE 1200CALGARY, ALBERTA T2P 3S8TEL (403) 262-2799 | FAX (403) 262-2790 |
Harvest (US) Holdings, Inc.
February 26, 2010
Page 2
February 26, 2010
Page 2
SEC PARAMETERS
Estimated Net Reserves and Income Data
Certain Leasehold and Royalty Interests of
Harvest (US) Holdings, Inc.
As of December 31, 2009
Estimated Net Reserves and Income Data
Certain Leasehold and Royalty Interests of
Harvest (US) Holdings, Inc.
As of December 31, 2009
Proved | ||||||||||||||||
Developed | Total | |||||||||||||||
Producing | Non-Producing | Undeveloped | Proved | |||||||||||||
Net Remaining Reserves |
||||||||||||||||
Oil/Condensate Barrels |
32,117 | 98,482 | 95,401 | 225,999 | ||||||||||||
Gas MMCF |
161 | 492 | 473 | 1,126 | ||||||||||||
Income Data |
||||||||||||||||
Future Gross Revenue |
$ | 1,990 | $ | 6,102 | $ | 5,899 | $ | 13,990 | ||||||||
Deductions |
523 | 925 | 2,761 | 4,210 | ||||||||||||
Future Net Income (FNI) |
$ | 1,466 | $ | 5,176 | $ | 3,138 | $ | 9,780 | ||||||||
Discounted FNI @ 10% |
$ | 1,053 | $ | 3,987 | $ | 1,773 | $ | 6,812 |
Liquid hydrocarbons are expressed in thousands of 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.
PHDWin Petroleum Economic Evaluation Software (version 2.8 Build 10), a copyrighted program of
TRC Consultants L.C was used solely at the request of Harvest. 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
incorporate 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 75 percent and
gas reserves account for the remaining 25 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- $M | ||||||
As of December 31, 2009 | ||||||
Discount Rate | Total | |||||
Percent | Proved | |||||
5 | $ | 7,940 | ||||
8 | $ | 7,206 | ||||
12 | $ | 6,476 | ||||
15 | $ | 6,054 |
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS TBPE FIRM LIC. NO. F-1580
Harvest (US) Holdings, Inc.
February 26, 2010
Page 3
February 26, 2010
Page 3
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.
No attempt was made to quantify or otherwise account for any accumulated gas production
imbalances that may exist. The gas volumes included herein attributes gas consumed in operations
as reserves.
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.
The reserves reported herein are limited to the period prior to expiration of current
contracts providing the legal right to produce or a revenue interest in such production unless
evidence indicates that contract renewal is reasonably certain. Furthermore, properties in the
different countries may be subjected to significantly varying contractual fiscal terms that affect
the net revenue to Harvest for the production of these volumes. The prices and economic return
received for these net volumes can vary significantly based on the terms of these contracts.
Therefore, when applicable, Ryder Scott reviewed the fiscal terms of such contracts and discussed
with Harvest the net economic benefit attributed to such operations for the determination of the
net hydrocarbon volumes and income thereof. Ryder Scott has not conducted an exhaustive audit or
verification of such contractual information. Neither our review of such contractual information
or our acceptance of Harvests representations regarding such contractual information should be
construed as a legal opinion on this matter.
Ryder Scott did not evaluate country and geopolitical risks in the countries where Harvest
operates or has interests. Harvests 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, various taxes and levies including income tax, and foreign trade and investment and are
subject to change from time to time. Such changes in governmental regulations and policies may
cause volumes of reserves
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS TBPE FIRM LIC. NO. F-1580
Harvest (US) Holdings, Inc.
February 26, 2010
Page 4
February 26, 2010
Page 4
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 Harvest 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 31, 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. Reserves attributable to non-producing and undeveloped reserves included herein
were estimated by the volumetric method which utilized all pertinent well and seismic data
available through December 31, 2009.
In general, the reserves included herein were estimated by performance methods or the
volumetric method; however, other methods were used in certain cases where characteristics of the
data indicated such other methods were more appropriate in our opinion. The reserves estimated by
the performance method utilized extrapolations of various historical data in those cases where such
data were definitive. Reserves were estimated by the volumetric method in those cases where there
were inadequate historical performance data to establish a definitive trend or where the use of
production performance data as a basis for the reserve estimates was considered to be
inappropriate.
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. Harvest 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 Harvest 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 Harvest.
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
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS TBPE FIRM LIC. NO. F-1580
Harvest (US) Holdings, Inc.
February 26, 2010
Page 5
February 26, 2010
Page 5
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 Harvest.
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 SEC price parameters
using 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.
Costs
Operating costs for the leases and wells in this report are based on the operating expense
reports of Harvest 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 Harvest and are based on authorizations for
expenditure for the proposed work or actual costs for similar
projects. Harvests 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 value and makes no
warranty for Harvests estimate.
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. Harvest 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 Harvest were held constant throughout the life of the properties.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS TBPE FIRM LIC. NO. F-1580
Harvest (US) Holdings, Inc.
February 26, 2010
Page 6
February 26, 2010
Page 6
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.
We are independent petroleum engineers with respect to Harvest. 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(s) 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 Harvest 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/ Scott Wilson | ||
Scott Wilson, P.E., M.B.A. | ||
Senior Vice President | ||
/sm
|
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS TBPE FIRM LIC. NO. F-1580
Harvest (US) Holdings, Inc.
February 26, 2010
Page 8
February 26, 2010
Page 8
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. Scott James Wilson was the primary
technical person responsible for the estimate of the reserves, future production, and income
presented herein.
Mr. Wilson, an employee of Ryder Scott Company L.P. (Ryder Scott) since 2000, is a Senior Vice
President responsible for coordinating and supervising staff and consulting engineers of the
company in ongoing reservoir evaluation studies worldwide. Before joining Ryder Scott, Mr. Wilson
served in a number of engineering positions with Atlantic Richfield Company. For more information
regarding Mr. Wilsons geographic and job specific experience, please refer to the Ryder Scott
Company website at http://www.ryderscott.com/Experience/Employees.php.
Mr. Wilson earned a Bachelor of Science degree in Petroleum Engineering from the Colorado School of
Mines in 1983 and an MBA in Finance from the University of Colorado in 1985, graduating from both
with High Honors. He is a registered Professional Engineer by exam in the States of Alaska,
Colorado, and Wyoming. He is also an active member of the Society of Petroleum Engineers; serving
as co-Chairman of the SPE Reserves and Economics Technology Interest Group, and Gas Technology
Editor for SPEs Journal of Petroleum Technology. He is a member and past chairman of the Denver
section of the Society of Petroleum Evaluation Engineers. Mr. Wilson has published several
technical papers and holds two US patents.
In addition to gaining experience and competency through prior work experience, the Wyoming 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. Wilson fulfills. As part
of his 2009 continuing education hours, Mr. Wilson attended an internally presented sixteen hours
of formalized training as well as a public forum 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. Wilson attended an additional seven hours of formalized external
training during 2009 covering such topics as the SPE/WPC/AAPG/SPEE Petroleum Resources Management
System, reservoir engineering and petroleum economics evaluation methods, procedures and software
and ethics for consultants.
Based on his educational background, professional training and more than 25 years of practical
experience in the estimation and evaluation of petroleum reserves, Mr. Wilson has attained the
professional qualifications as a Reserves Estimator and Reserves Auditor 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 TBPE FIRM LIC. NO. F-1580
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.
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.
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]
PETROLEUM RESERVES DEFINITIONS
Page 4
Page 4
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.
PETROLEUM RESERVES DEFINITIONS
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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.