Attached files
1
Exhibit 99.1
MHA Petroleum Consultants
4700 Stockdale Highway, Suite 110
Bakersfield, CA 93309
PYRAMID OIL COMPANY
THIRD PARTY REPORT ON RESERVES
BY
MHA PETROLEUM CONSULTANTS
This report is provided to satisfy the requirements contained in Item
1202(a)(8) of the United States Securities and Exchange Commission Regulation
S-K.
The numbering of the items below corresponds to the requirements set out in
Item 1202(a)(8) of Regulation S-K. The terms defined in Regulation S-K and
Regulation S-X have the same meaning in this report.
i. We prepared an independent evaluation of the proved oil and gas
reserves of Pyramid Oil Company (Pyramid) for the management of Pyramid. The
primary purpose of our evaluation report was to provide estimates of reserves
information in support of Pyramid's year-end reserves reporting requirements
under U.S. Securities Regulation S-K and for other internal business and
financial needs of Pyramid.
ii. We evaluated and reviewed the reserves of Pyramid as of December 31,
2010. The completion (transmittal) of our report was March 14, 2011.
iii. The following table presents the proved reserves, net after
royalty, that we estimated using constant prices and costs, by geographic
area. Our report covers 100 percent of the total net proved oil and natural
gas reserves of Pyramid.
Pyramid Net Proved Reserves
----------------------------------
Crude Natural Oil
Oil Gas Equivalent(1)
Mbbl MMcf Mbbl
------- ------- ------------
LOCATION OF RESERVES
State of California, USA 535.8 0.0 506.3
Portion of Total Covered 99.7% 0% 98%
State of New York, USA 0.0 35.4 5.9
Portion of Total Covered 0% 81% 1%
State of Texas, USA 1.7 8.1 3.1
Portion of Total Covered 0.3% 19% 1%
(1) Oil Equivalence Factors: Crude oil 1 bbl/bbl, Natural Gas 6 Mcf/bbl
iv. We reviewed 100 percent of Pyramid's reserves in connection with the
preparation of this report. This report has been prepared in accordance with
our understanding of the Standards Pertaining to the Estimating and Auditing
of Oil and Gas Reserve Information as promulgated by the Societies of
Petroleum Engineers and Petroleum Evaluation Engineers, and in our opinion, it
will conform to the U.S. Securities and Exchange Commission regulations and
requirements.
2
Pyramid furnished us all of the accounts, records, recent
production, estimated capital costs, operating expenses and other data
required for this evaluation. The ownership interest and other factual data
provided by Pyramid were accepted without independent verification (with the
exception of oil and gas production data which were independently verified
through the public websites of the respective conservation departments of the
states of California, New York & Texas).
We did not conduct site inspections of the properties presented in
this report nor was it considered necessary for the purposes of our report.
v. Proved oil and gas reserves are the estimated quantities of crude
oil and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in the future years from the known
reservoirs under existing economic and operating conditions. The oil and
natural gas prices used in this report are based on a 12-month average price,
calculated as the unweighted arithmetic average of the monthly prices received
during the 12-month period prior to the effective date of this report.
Product prices that were actually used for each property reflect adjustment
for gravity, quality, local conditions and/or distance from market. Operating
costs for the leases and wells in this report are based on the operating
expense data provided by Pyramid and include only those costs directly
applicable to the leases and wells.
The production (reserves) forecast for each lease was based on
historical production data provided by Pyramid or obtained from public records
through December 2010. The leases were evaluated using a decline curve
analysis technique to determine the forecast of future oil or gas production.
For all leases, an exponential decline curve was found to provide a good match
to the historical production trend. There was no additional engineering or
geological information available to us with which to make any volumetric
checks of the assigned gas reserves.
For the California oil reserves, estimated future annual operating
cost for each lease was based on the full year 2010 operating costs incurred
or paid by Pyramid (through December 2010). Operating costs for the New York
gas properties were calculated from January - December 2010 expenses. In some
cases adjustments were made to exclude non-recurring costs from the
calculation of the projected monthly operating costs. Overhead expenses are
not included in the economic analyses beyond those directly attributable to
the respective properties included in the operating costs provided by Pyramid.
In our economic analysis, operating and capital costs are those
costs estimated as applicable at the effective date of our report, with no
future escalation. The capital costs and revised operating costs associated
with the implementation of committed future projects may be included in the
economic projections.
vi. Our report has been prepared assuming the continuation of existing
regulatory and fiscal conditions subject to SEC regulations. There is no
assurance that changes in regulation will not occur; such changes, which
cannot reliably be predicted, could impact Pyramid's ability to recover the
estimated reserves.
vii. The reserves and economics indicated in this report are estimates
only and should not be considered as exact quantities. They represent our
best judgments, after having utilized generally accepted engineering and
economic procedures. Moreover, the net revenues indicated herein should not
be construed as fair market values. The accuracy of reserve evaluations is
always subject to uncertainty. The magnitude of this uncertainty is generally
proportional to the quantity and quality of data available for analysis. As
reservoirs mature and new information becomes available, revisions may be
required which may increase or decrease the previous reserve assignments.
3
The reserves contained in this report are based on a reserve audit,
which utilized a technical analysis of the available data using accepted
petroleum engineering principles. However, they must be accepted with the
understanding that further information and future reservoir performance after
the date of the estimate may justify their revision.
viii. In our opinion, the reserves information we evaluated has been
determined in accordance with all appropriate industry standards, methods and
procedures applicable for the filing of reserves information under U.S. SEC
Regulation S-K.
ix. A summary of our conclusions with respect to the Pyramid reserves
estimates is provided below:
Proved Developed Proved Total
Producing Non- Undeveloped Proved
(PDP) Producing (PUD)
(PDNP)
------------------------ ------------ ------
Oil Reserves, Thousand (M)
Barrels - Gross (8/8ths) 631.3 36.1 125.6 793.0
Net Revenue Interest 432.7 27.1 77.8 537.6
Gas Reserves, MMcf
Gross (8/8ths) 136.9 92.4 0.0 229.3
Net Revenue Interest 35.4 8.1 0.0 43.5
Future Revenue,
Thousand (M) $ 33,727.3 2,220.8 6,025.0 41,973.1
Future Deductions, M $ 16,370.1 712.9 2,371.1 19,454.1
Future Net Income, M $
Undiscounted 17,357.2 1,507.9 3,654.0 22,519.0
Discounted at 10 percent 11,104.7 528.9 2,225.0 13,858.6
Prepared by:
MHA Petroleum Consultants
Bakersfield, California
March 14, 2011
/s/ Alan A. Burzlaff
--------------------
Alan A. Burzlaff
President MHA California
Licensed by the California Board for
Professional Engineers and Land Surveyors
License No. P 138
