Attached files
file | filename |
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10-K - FORM 10-K - BATTALION OIL CORP | d80526e10vk.htm |
EX-23.2 - EX-23.2 - BATTALION OIL CORP | d80526exv23w2.htm |
EX-31.2 - EX-31.2 - BATTALION OIL CORP | d80526exv31w2.htm |
EX-31.1 - EX-31.1 - BATTALION OIL CORP | d80526exv31w1.htm |
EX-21.1 - EX-21.1 - BATTALION OIL CORP | d80526exv21w1.htm |
EX-23.1 - EX-23.1 - BATTALION OIL CORP | d80526exv23w1.htm |
EX-32.1 - EX-32.1 - BATTALION OIL CORP | d80526exv32w1.htm |
EX-32.2 - EX-32.2 - BATTALION OIL CORP | d80526exv32w2.htm |
EX-10.15 - EX-10.15 - BATTALION OIL CORP | d80526exv10w15.htm |
EX-10.14 - EX-10.14 - BATTALION OIL CORP | d80526exv10w14.htm |
Exhibit
99.1
FORREST A. GARB & ASSOCIATES, INC.
INTERNATIONAL PETROLEUM CONSULTANTS
5310 HARVEST HILL ROAD, SUITE 275, LB 152
DALLAS, TEXAS 75230 5805
(972)788-1110 Telefax (972)991-3160 (E MAIL) forgarb@forgarb.com
5310 HARVEST HILL ROAD, SUITE 275, LB 152
DALLAS, TEXAS 75230 5805
(972)788-1110 Telefax (972)991-3160 (E MAIL) forgarb@forgarb.com
February 9, 2011
Mr. Larry Lee, President
RAM Energy Resources, Inc.
5100 E. Skelly Drive, Suite 650
Tulsa, Oklahoma 74135
RAM Energy Resources, Inc.
5100 E. Skelly Drive, Suite 650
Tulsa, Oklahoma 74135
Re: SEC Case Executive Summary
Dear Mr. Lee:
At your request, Forrest A. Garb & Associates, Inc. (FGA) has estimated the proved reserves
and future net revenue, as of January 1, 2011, attributable to interests owned by RAM Energy
Resources, Inc. (RAM). The proved reserves tabulated in this report are represented by RAM to
constitute 100 percent of all proved reserves owned by RAM. These reserves are associated with
certain oil and gas properties located in Arkansas, Louisiana, Mississippi, New Mexico, North
Dakota, Oklahoma, Texas, West Virginia, and Wyoming.
This report has been prepared using the definitions and guidelines of the U.S. Securities and
Exchange Commission (SEC), and with the exception of the exclusion of future income taxes, conforms
to the FASB Accounting Standards Codification Topic 932, Extractive Industries Oil and Gas. The
SEC guidelines specify the use of a 12-month first-of-the-month average benchmark price, a 10
percent discount factor, and constant oil and gas prices and costs.
The following table summarizes the estimated total net reserves and future net revenue as of
January 1, 2011:
Estimated Net Reserves1 | Estimated Future Net Revenue | |||||||||||||||||||
Oil and | Discounted at | |||||||||||||||||||
Condensate | Gas | NGL | Undiscounted | 10% Per Year3 | ||||||||||||||||
Proved Reserve Category | (MBbl)2 | (MMcf)2 | (MBbl)2 | (M$)2 | (M$)2 | |||||||||||||||
Developed
Producing |
8,087.07 | 24,134.19 | 1,357.53 | 393,317.15 | 232,448.77 | |||||||||||||||
Non-producing |
327.12 | 7,642.59 | 128.46 | 42,639.76 | 26,902.84 | |||||||||||||||
Undeveloped |
4,671.79 | 21,832.06 | 889.19 | 252,757.68 | 104,896.25 | |||||||||||||||
Total
Proved4 |
13,085.98 | 53,608.84 | 2,375.18 | 688,714.59 | 364,247.86 |
1 | The definitions for all reserves incorporated in this study have been set forth in this report. | |
2 | MBbl = thousands of barrels, MMcf = millions of cubic feet, M$ = thousands of dollars. | |
3 | The discounted future net revenue is not represented to be the fair market value of these reserves. | |
4 | The reserves and revenues in the summary table were estimated using the PHDWin economics program. Due to the rounding procedures used in this program, there may be slight differences in the calculated and summed values. |
FORREST A. GARB & ASSOCIATES, INC.
ENGINEERING
Proved oil and gas reserves are those quantities of oil and gas which, by analysis of
engineering and geoscience data, can be estimated with reasonable certainty to be economically
producible from a given date forward. The basis for estimating the proved producing reserves was
the extrapolation of historical production having an established decline trend. Volumetrics and/or
analogy were used for forecasting properties where insufficient data were present for production
decline extrapolation. Production histories were provided by RAM and checked using published
production data and state reporting records. The reserves for other reserve categories were
estimated by the volumetric method considering well logs, core analyses, geologic maps, etc.,
and/or by analogy to adjacent comparable wells. FGA has accepted RAMs intent to recomplete the
proved developed non-producing properties and to drill the proved undeveloped locations.
The analysis and findings presented in this report, with the exceptions of parameters
specified by others, represent FGAs informed judgments based on accepted standards of professional
engineering practice, but are subject to the generally recognized and unforeseen risks associated
with the interpretation of geological, geophysical, and engineering data. Future changes in
federal, state, or local regulations may adversely impact the ability to recover the future oil and
gas volumes expected. Changes in economic and market conditions from the assumptions and parameters
used in this study may cause the total quantity of future oil or gas recovered, actual production
rates, prices received, operating expenses and capital costs to vary from the results presented in
this report.
The available geologic and engineering data were furnished by RAM for FGAs review. Gas
volumes are expressed in millions of cubic feet (MMcf) at standard temperature and pressure. Gas
sales imbalances have not been taken into account in the reserve estimates. The oil reserves shown
in this study include crude oil and/or condensate. Oil and natural gas liquids (NGL) volumes are
expressed in thousands of barrels (MBbl), with one barrel equivalent to 42 United States gallons.
ECONOMICS
The benchmark oil and gas prices used in this study are the average of the first trading
day of the month spot prices posted for the West Texas Intermediate (WTI) oil and Henry Hub natural
gas, per SEC guidelines. Oil and NGL prices are based on a benchmark price of $79.43 per barrel and
have been adjusted by lease for gravity, transportation fees, and regional price differentials. Gas
prices per thousand cubic feet (MCF) are based on a benchmark price of $4.376 per million British
thermal units (MMBtu) and have been adjusted by lease for Btu content, transportation fees, and
regional price differentials. The adjustment is based on the differential between historic oil and
gas sales and the corresponding benchmark price. The oil, NGL, and gas prices were held constant
for the economic life of the properties as specified by the SEC.
Lease operating cost data were provided by RAM for FGAs
review. The average lease operating costs and overhead
costs for the prior 12 months, or for the months
available for each property, were utilized for this
study. Capital expenditures are included as required for
workovers, the future development of new wells, and for
production equipment. All costs have been held constant
in this evaluation. Existing or potential liabilities
stemming from environmental conditions caused by current
or past operating practices have not been considered in
this report. No costs are included in the projections of
future net revenue or in our economic
FORREST A. GARB & ASSOCIATES, INC.
analyses to restore, repair, or improve the environmental conditions of the properties studied
to meet existing or future local, state, or federal regulations.
Grand total summary economic projections by reserve category and category summaries (including
one-line summaries for the individual properties) are presented in Attachment A. The individual
properties have been ranked in descending order of discounted future net revenue value. This
ranking is presented as Attachment B. FGAs evaluation notes three RAM properties with negative
present value discounted at ten percent. These properties are reasonable to include as they
represent two facility abandonment costs and the North East Fitts injector. Attachment C is a
master list of all properties. Attachment D presents the definitions of proved oil and gas reserves
in accordance with the SEC. General comments regarding this report and the estimation of future
reserves and revenue are presented in Attachment E. Attachment F contains the consulting firm
profile.
The estimated future net revenues shown are those that should be realized from the sale of
estimated oil, NGL and gas reserves after deduction of severance taxes, ad valorem taxes, and
direct operating costs. No deductions have been made for federal income taxes or other indirect
costs, such as interest expense and loan repayments. Surface and well equipment salvage values have
not been considered in the revenue projections. The estimated reserves included in the cash flow
projections have not been adjusted for risk. The reserves included in this study are estimates only
and should not be construed as exact quantities. Future conditions may affect recovery of estimated
reserves and revenue, and all categories of reserves may be subject to revision as more performance
data become available.
RAM provided ownership interest in the properties, and FGA accepted the extent and character
of ownership (working interest and net revenue interest) as represented. Our staff conducted no
independent well tests, property inspections, or audits of completion and operating expenses as
part of this study.
FGA is an independent firm of geologists and petroleum engineers. Neither the firm nor its
employees own any interest in the properties studied, nor have we been employed on a contingency
basis. FGA has used all necessary methods and procedures in the preparation of this report for the
evaluation of these properties.
This letter was prepared under the supervision of W.D. Harris III, Registered Professional
Engineer No. 75222, State of Texas, and is intended to be the same as the original report prepared
for RAM.
Yours truly, | ||
/s/ FORREST A.GARB & ASSOCIATES, INC. | ||
Forrest A. Garb & Associates, Inc. Texas Registered Engineering Firm F-629 |
||
/s/ W. D. HARRIS III | ||
W. D. Harris III Chief Executive Officer Forrest A. Garb & Associates, Inc. |
SWW/psd
FORREST A. GARB & ASSOCIATES, INC.
DEFINITIONS FOR OIL AND GAS RESERVES*
(1) Acquisition of properties. Costs incurred to purchase, lease or otherwise acquire a
property, including costs of lease bonuses and options to purchase or lease properties, the portion
of costs applicable to minerals when land including mineral rights is purchased in fee, brokers
fees, recording fees, legal costs, and other costs incurred in acquiring properties.
(2) Analogous reservoir. Analogous reservoirs, as used in resources assessments, have similar rock
and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms,
but are typically at a more advanced stage of development than the reservoir of interest and thus
may provide concepts to assist in the interpretation of more limited data and estimation of
recovery. When used to support proved reserves, an analogous reservoir refers to a reservoir that
shares the following characteristics with the reservoir of interest:
(i) Same geological formation (but not necessarily in pressure communication with the reservoir of
interest);
(ii) Same environment of deposition;
(iii) Similar geological structure; and
(iv) Same drive mechanism.
(3) Bitumen. Bitumen, sometimes referred to as natural bitumen, is petroleum in a solid or
semisolid state in natural deposits with a viscosity greater than 10,000 centipoise measured at
original temperature in the deposit and atmospheric pressure, on a gas free basis. In its natural
state it usually contains sulfur, metals, and other non-hydrocarbons.
(4) Condensate. Condensate is a mixture of hydrocarbons that exists in the gaseous phase at
original reservoir temperature and pressure, but that, when produced, is in the liquid phase at
surface pressure and temperature.
(5) Deterministic estimate. The method of estimating reserves or resources is called deterministic
when a single value for each parameter (from the geoscience, engineering, or economic data) in the
reserves calculation is used in the reserves estimation procedure.
(6) Developed oil and gas reserves. 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.
* | These Reserves Definitions are those included in the Securities and Exchange Commission Regulation S-X as of January 1, 2010. |
FORREST A. GARB & ASSOCIATES, INC.
(7) Development costs. Costs incurred to obtain access to proved reserves and to provide facilities
for extracting, treating, gathering and storing the oil and gas. More specifically, development
costs, including depreciation and applicable operating costs of support equipment and facilities
and other costs of development activities, are costs incurred to:
(i) Gain access to and prepare well locations for drilling, including surveying well locations for
the purpose of determining specific development drilling sites, clearing ground, draining, road
building, and relocating public roads, gas lines, and power lines, to the extent necessary in
developing the proved reserves.
(ii) Drill and equip development wells, development-type stratigraphic test wells, and service
wells, including the costs of platforms and of well equipment such as casing, tubing, pumping
equipment, and the wellhead assembly.
(iii) Acquire, construct, and install production facilities such as lease flow lines, separators,
treaters, heaters, manifolds, measuring devices, and production storage tanks, natural gas cycling
and processing plants, and central utility and waste disposal systems.
(iv) Provide improved recovery systems.
(8) Development project. A development project is the means by which petroleum resources are
brought to the status of economically producible. As examples, the development of a single
reservoir or field, an incremental development in a producing field, or the integrated development
of a group of several fields and associated facilities with a common ownership may constitute a
development project.
(9) Development well. A well drilled within the proved area of an oil or gas reservoir to the depth
of a stratigraphic horizon known to be productive.
(10) Economically producible, The term economically producible, as it relates to a resource, means
a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of
the operation. The value of the products that generate revenue shall be determined at the terminal
point of oil and gas producing activities as defined in paragraph (a)(16) of this section.
(11) Estimated ultimate recovery (EUR). Estimated ultimate recovery is the sum of reserves
remaining as of a given date and cumulative production as of that date.
(12) Exploration costs. Costs incurred in identifying areas that may warrant examination and in
examining specific areas that are considered to have prospects of containing oil and gas reserves,
including costs of drilling exploratory wells and exploratory-type stratigraphic test wells.
Exploration costs may be incurred both before acquiring the related property (sometimes referred to
in part as prospecting costs) and after acquiring the property. Principal types of exploration
costs, which include depreciation and applicable operating costs of support equipment and
facilities and other costs of exploration activities, are:
(i) Costs of topographical, geographical and geophysical
studies, rights of access to properties to conduct those
studies, and salaries and other expenses of geologists,
geophysical crews, and others conducting those studies.
Collectively, these are sometimes referred to as
geological and geophysical or G&G costs.
FORREST A. GARB & ASSOCIATES, INC.
(ii) Costs of carrying and retaining undeveloped properties, such as delay rentals, ad valorem
taxes on properties, legal costs for title defense, and the maintenance of land and lease records.
(iii) Dry hole contributions and bottom hole contributions.
(iv) Costs of drilling and equipping exploratory wells.
(v) Costs of drilling exploratory-type stratigraphic test wells.
(13) Exploratory well An exploratory well is a well drilled to find a new field or to find a new
reservoir in a field previously found to be productive of oil or gas in another reservoir.
Generally, an exploratory well is any well that is not a development well, an extension well, a
service well, or a stratigraphic test well as those items are defined in this section.
(14) Extension well. An extension well is a well drilled to extend the limits of a known reservoir.
(15) Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or
related to the same individual geological structural feature and/or stratigraphic condition. There
may be two or more reservoirs in a field that are separated vertically by intervening impervious,
strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by
being in overlapping or adjacent fields may be treated as a single or common operational field. The
geological terms structural feature and stratigraphic condition are intended to identify localized
geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-
interest, etc.
(16) Oil and gas producing activities, (i) Oil and gas producing activities include:
(A) The search for crude oil, including condensate and natural gas liquids, or natural gas (oil
and gas) in their natural states and original locations;
(B) The acquisition of property rights or properties for the purpose of further exploration or for
the purpose of removing the oil or gas from such properties;
(C) The construction, drilling, and production activities necessary to retrieve oil and gas from
their natural reservoirs, including the acquisition, construction, installation, and maintenance of
field gathering and storage systems, such as:
(1) | Lifting the oil and gas to the surface; and | ||
(2) | Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons); and |
(D) Extraction of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil
sands, shale, coalbeds, or other nonrenewable natural resources which are intended to be upgraded
into synthetic oil or gas, and activities undertaken with a view to such extraction.
FORREST A. GARB & ASSOCIATES, INC.
(17) Possible reserves. Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves.
(i) When deterministic methods are used, the total quantities ultimately recovered from a project
have a low probability of exceeding proved plus probable plus possible reserves. When probabilistic
methods are used, there should be at least a 10% probability that the total quantities ultimately
recovered will equal or exceed the proved plus probable plus possible reserves estimates.
(ii) Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where
data control and interpretations of available data are progressively less certain. Frequently, this
will be in areas where geoscience and engineering data are unable to define clearly the area and
vertical limits of commercial production from the reservoir by a defined project.
(iii) Possible reserves also include incremental quantities associated with a greater percentage
recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves.
(iv) The proved plus probable and proved plus probable plus possible reserves estimates must be
based on reasonable alternative technical and commercial interpretations within the reservoir or
subject project that are clearly documented, including comparisons to results in successful similar
projects.
(v) Possible reserves may be assigned where geoscience and engineering data identify directly
adjacent portions of a reservoir within the same accumulation that may be separated from proved
areas by faults with displacement less than formation thickness or other geological discontinuities
and that have not been penetrated by a wellbore, and the registrant believes that such adjacent
portions are in communication with the known (proved) reservoir. Possible reserves may be assigned
to areas that are structurally higher or lower than the proved area if these areas are in
communication with the proved reservoir.
(vi) Pursuant to paragraph (a)(22)(iii) of this section, where direct observation has defined a
highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil
reserves should be assigned in the structurally higher portions of the reservoir above the HKO only
if the higher contact can be established with reasonable certainty through reliable technology.
Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as
probable and possible oil or gas based on reservoir fluid properties and pressure gradient
interpretations.
(18) Probable reserves. Probable reserves are those additional reserves that are less certain to be
recovered than proved reserves but which, together with proved reserves, are as likely as not to be
recovered.
(i) When deterministic methods are used, it is as likely as not that actual remaining quantities
recovered will exceed the sum of estimated proved plus probable reserves. When probabilistic
methods are used, there should be at least a 50% probability that the actual quantities recovered
will equal or exceed the proved plus probable reserves estimates.
FORREST A. GARB & ASSOCIATES, INC.
(ii) Probable reserves may be assigned to areas of a reservoir adjacent to proved
reserves where data control or interpretations of available data are less certain, even if the
interpreted reservoir continuity of structure or productivity does not meet the reasonable
certainty criterion. Probable reserves may be assigned to areas that are structurally higher than
the proved area if these areas are in communication with the proved reservoir.
(iii) Probable reserves estimates also include potential incremental quantities associated with a
greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.
(iv) See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section.
(19) Probabilistic estimate. The method of estimation of reserves or resources is called
probabilistic when the full range of values that could reasonably occur for each unknown parameter
(from the geoscience and engineering data) is used to generate a full range of possible outcomes
and their associated probabilities of occurrence.
(20)
Production costs. (i) Costs incurred to operate and maintain wells and related equipment and
facilities, including depreciation and applicable operating costs of support equipment and
facilities and other costs of operating and maintaining those wells and related equipment and
facilities. They become part of the cost of oil and gas produced. Examples of production costs
(sometimes called lifting costs) are:
(A) Costs of labor to operate the wells and related equipment and facilities.
(B) Repairs and maintenance.
(C) Materials, supplies, and fuel consumed and supplies utilized in operating the wells and related
equipment and facilities.
(D) Property taxes and insurance applicable to proved properties and wells and related equipment
and facilities.
(E) Severance taxes.
(ii) Some support equipment or facilities may serve two or more oil and gas producing activities
and may also serve transportation, refining, and marketing activities. To the extent that the
support equipment and facilities are used in oil and gas producing activities, their depreciation
and applicable operating costs become exploration, development or production costs, as appropriate.
Depreciation, depletion, and amortization of capitalized acquisition, exploration, and development
costs are not production costs but also become part of the cost of oil and gas produced along with
production (lifting) costs identified above.
(21) Proved area. The part of a property to which proved reserves have been specifically
attributed.
FORREST A. GARB & ASSOCIATES, INC.
(22) 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.
(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.
FORREST A. GARB & ASSOCIATES, INC.
(23) Proved properties. Properties with proved reserves.
(24) Reasonable certainty. If deterministic methods are used, reasonable certainty means a high
degree of confidence that the quantities will be recovered. If probabilistic methods are used,
there should be at least a 90% probability that the quantities actually recovered will equal or
exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be
achieved than not, and, as changes due to increased availability of geoscience (geological,
geophysical, and geochemical), engineering, and economic data are made to estimated ultimate
recovery (EUR) with time, reasonably certain EUR is much more likely to increase or remain constant
than to decrease.
(25) Reliable technology. Reliable technology is a grouping of one or more technologies (including
computational methods) that has been field tested and has been demonstrated to provide reasonably
certain results with consistency and repeatability in the formation being evaluated or in an
analogous formation.
(26) 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).
(27) Reservoir. A porous and permeable underground formation containing a natural accumulation of
producible oil and/or gas that is confined by impermeable rock or water barriers and is individual
and separate from other reservoirs.
(28) Resources. Resources are quantities of oil and gas estimated to exist in naturally occurring
accumulations. A portion of the resources may be estimated to be recoverable, and another portion
may be considered to be unrecoverable. Resources include both discovered and undiscovered
accumulations.
(29) Service well. A well drilled or completed for the purpose of supporting production in an
existing field. Specific purposes of service wells include gas injection, water injection, steam
injection, air injection, salt-water disposal, water supply for injection, observation, or
injection for in-situ combustion.
(30) Stratigraphic test well. A stratigraphic test well is a drilling effort, geologically
directed, to obtain information pertaining to a specific geologic condition. Such wells customarily
are drilled without the intent of being completed for hydrocarbon production. The classification
also includes tests identified as core tests and all types of expendable holes related to
hydrocarbon exploration. Stratigraphic tests are classified as exploratory type if not drilled in
a known area or development type if drilled in a known area.
FORREST A. GARB & ASSOCIATES, INC.
(31) Undeveloped oil and gas reserves. 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.
(32) Unproved properties. Properties with no proved reserves.