Attached files
file | filename |
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EX-99.4 - EX-99.4 - CUBIC ENERGY INC | a14-11660_1ex99d4.htm |
EX-23.1 - EX-23.1 - CUBIC ENERGY INC | a14-11660_1ex23d1.htm |
8-K/A - AMENDMENT TO FORM 8-K - CUBIC ENERGY INC | a14-11660_18ka.htm |
Exhibit 99.3
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE
ACQUIRED PROPERTIES
|
Page |
Independent Auditors Report |
2 |
Independent Auditors Review Report |
4 |
Statements of Revenues and Direct Operating Expenses of the Acquired Properties |
5 |
Notes to Statements of Revenues and Direct Operating Expenses of the Acquired Properties |
9 |
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Shareholders of Cubic Energy, Inc.
We have audited the accompanying financial statements which comprise the statements of revenues and direct operating expenses of certain oil and gas properties (collectively, the Acquired Properties) acquired by Cubic Energy, Inc. on October 2, 2013 from Gastar Exploration Texas, LP (Gastar), Navasota Resources LTD., LLP (Navasota) and Tauren Exploration, Inc. (Tauren), for the years ended December 31, 2012 and 2011.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal controls. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the revenues and direct operating expenses of the Acquired Properties for the years ended December 31, 2012 and 2011 in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying financial statements were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in the notes to the financial statements and are not intended to be a complete presentation of the Acquired Properties. Our opinion on the statements of revenues and direct operating expenses is not affected by this matter.
/s/ Philip Vogel & Co. |
|
|
|
Dallas, Texas |
|
December 18, 2013 |
|
INDEPENDENT AUDITORS REVIEW REPORT
To the Board of Directors and Shareholders of Cubic Energy, Inc.
We have reviewed the accompanying statements of revenues and direct operating expenses of certain oil and gas properties (the Acquired Properties) acquired by Cubic Energy, Inc. on October 2, 2013 from Gastar Exploration Texas, LP (Gastar), Navasota Resources LTD., LLP (Navasota) and Tauren Exploration, Inc. (Tauren), for the nine-month periods ended September 30, 2013 and 2012 (the interim financial information).
Managements Responsibility for the Interim Financial Information
Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America; this responsibility includes the design, implementation, and maintenance of internal controls sufficient to provide a reasonable basis for the preparation and fair presentation of interim financial information in accordance with the applicable financial reporting framework.
Auditors Responsibility
Our responsibility is to conduct our reviews in accordance with auditing standards generally accepted in the United States of America applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial information. Accordingly, we do not express such an opinion.
Conclusion
Based on our reviews, we are not aware of any material modifications that should be made to the interim financial information referred to above for it to be in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying statements of revenues and direct operating expenses of the Acquired Properties were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in the notes to the financial statements and are not intended to be a complete presentation of the Acquired Properties.
/s/ Philip Vogel & Co. |
|
|
|
Dallas, Texas |
|
December 18, 2013 |
|
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE ACQUIRED PROPERTIES
|
|
Year Ended December 31, 2012 |
| ||||||||||
|
|
Gastar |
|
Navasota |
|
Tauren |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
REVENUES: |
|
|
|
|
|
|
|
|
| ||||
Natural gas |
|
$ |
9,491,139 |
|
$ |
3,688,013 |
|
$ |
215,620 |
|
$ |
13,394,772 |
|
NGLs |
|
|
|
|
|
73,277 |
|
73,277 |
| ||||
Oil |
|
1,631,883 |
|
741,950 |
|
74,950 |
|
2,448,783 |
| ||||
Total revenues |
|
11,123,022 |
|
4,429,963 |
|
363,847 |
|
15,916,832 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
DIRECT OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
Production taxes |
|
88,166 |
|
29,072 |
|
10,356 |
|
127,594 |
| ||||
Lease operating costs |
|
2,820,208 |
|
1,010,034 |
|
501,603 |
|
4,331,845 |
| ||||
Transportation, marketing and other |
|
1,721,120 |
|
1,034,161 |
|
35,544 |
|
2,790,825 |
| ||||
Workover |
|
830,540 |
|
92,089 |
|
1,245 |
|
923,874 |
| ||||
Volume shortfall costs |
|
1,991,132 |
|
|
|
|
|
1,991,132 |
| ||||
Total direct operating expenses |
|
7,451,166 |
|
2,165,356 |
|
548,748 |
|
10,165,270 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Excess of revenues over direct operating expenses |
|
$ |
3,671,856 |
|
$ |
2,264,607 |
|
$ |
(184,901 |
) |
$ |
5,751,562 |
|
See accompanying notes to statements of revenues and direct operating expenses.
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE ACQUIRED PROPERTIES
|
|
Year Ended December 31, 2011 |
| ||||||||||
|
|
Gastar |
|
Navasota |
|
Tauren |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
REVENUES: |
|
|
|
|
|
|
|
|
| ||||
Natural gas |
|
$ |
19,318,608 |
|
$ |
7,668,381 |
|
$ |
411,755 |
|
$ |
27,398,744 |
|
NGLs |
|
|
|
|
|
94,926 |
|
94,926 |
| ||||
Oil |
|
2,599,751 |
|
39,873 |
|
61,374 |
|
2,700,998 |
| ||||
Total revenues |
|
21,918,359 |
|
7,708,254 |
|
568,055 |
|
30,194,668 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
DIRECT OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
Production taxes |
|
124,841 |
|
(35,356 |
) |
9,021 |
|
98,506 |
| ||||
Lease operating costs |
|
3,386,111 |
|
818,139 |
|
386,382 |
|
4,590,632 |
| ||||
Transportation, marketing and other |
|
2,421,443 |
|
981,465 |
|
61,818 |
|
3,464,726 |
| ||||
Workover |
|
2,037,378 |
|
727,688 |
|
21,384 |
|
2,786,450 |
| ||||
Volume shortfall costs |
|
1,514,981 |
|
|
|
|
|
1,514,981 |
| ||||
Total direct operating expenses |
|
9,484,754 |
|
2,491,936 |
|
478,605 |
|
12,455,295 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Excess of revenues over direct operating expenses |
|
$ |
12,433,605 |
|
$ |
5,216,318 |
|
$ |
89,450 |
|
$ |
17,739,373 |
|
See accompanying notes to statements of revenues and direct operating expenses.
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE ACQUIRED PROPERTIES
|
|
(Unaudited) |
| ||||||||||
|
|
For the Nine Months Ended September 30, 2013 |
| ||||||||||
|
|
Gastar |
|
Navasota |
|
Tauren |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
REVENUES: |
|
|
|
|
|
|
|
|
| ||||
Natural gas |
|
$ |
7,518,597 |
|
$ |
2,942,810 |
|
$ |
225,108 |
|
$ |
10,686,515 |
|
NGLs |
|
|
|
|
|
93,918 |
|
93,918 |
| ||||
Oil |
|
985,035 |
|
706,477 |
|
38,312 |
|
1,729,824 |
| ||||
Total revenues |
|
8,503,632 |
|
3,649,287 |
|
357,338 |
|
12,510,257 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
DIRECT OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
Production taxes |
|
54,127 |
|
33,315 |
|
1,788 |
|
89,230 |
| ||||
Lease operating costs |
|
1,708,404 |
|
639,073 |
|
249,514 |
|
2,596,991 |
| ||||
Transportation, marketing and other |
|
953,754 |
|
728,809 |
|
33,156 |
|
1,715,719 |
| ||||
Workover |
|
202,221 |
|
|
|
1,117 |
|
203,338 |
| ||||
Volume shortfall costs |
|
1,846,710 |
|
|
|
|
|
1,846,710 |
| ||||
Total direct operating expenses |
|
4,765,216 |
|
1,401,197 |
|
285,575 |
|
6,451,988 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Excess of revenues over direct operating expenses |
|
$ |
3,738,416 |
|
$ |
2,248,090 |
|
$ |
71,763 |
|
$ |
6,058,269 |
|
See accompanying notes to statements of revenues and direct operating expenses.
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE ACQUIRED PROPERTIES
|
|
(Unaudited) |
| ||||||||||
|
|
For the Nine Months Ended September 30, 2012 |
| ||||||||||
|
|
Gastar |
|
Navasota |
|
Tauren |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
REVENUES: |
|
|
|
|
|
|
|
|
| ||||
Natural gas |
|
$ |
6,630,632 |
|
$ |
2,558,094 |
|
$ |
156,779 |
|
$ |
9,345,505 |
|
NGLs |
|
|
|
|
|
55,613 |
|
55,613 |
| ||||
Oil |
|
1,328,701 |
|
540,125 |
|
60,592 |
|
1,929,418 |
| ||||
Total revenues |
|
7,959,333 |
|
3,098,219 |
|
272,984 |
|
11,330,536 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
DIRECT OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
Production taxes |
|
70,305 |
|
19,144 |
|
8,361 |
|
97,810 |
| ||||
Lease operating costs |
|
1,801,691 |
|
631,857 |
|
358,533 |
|
2,792,081 |
| ||||
Transportation, marketing and other |
|
1,321,920 |
|
771,857 |
|
25,730 |
|
2,119,507 |
| ||||
Workover |
|
583,912 |
|
92,089 |
|
1,245 |
|
677,246 |
| ||||
Volume shortfall costs |
|
1,457,623 |
|
|
|
|
|
1,457,623 |
| ||||
Total direct operating expenses |
|
5,235,451 |
|
1,514,947 |
|
393,869 |
|
7,144,267 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Excess of revenues over direct operating expenses |
|
$ |
2,723,882 |
|
$ |
1,583,272 |
|
$ |
(120,885 |
) |
$ |
4,186,269 |
|
See accompanying notes to statements of revenues and direct operating expenses.
ACQUIRED PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(1) Basis of Presentation
The accompanying financial statements present the revenues and direct operating expenses of the oil and natural gas properties that were acquired pursuant to Purchase and Sale Agreements between the Company and (a) Gastar Exploration Texas, LP (Gastar) dated April 19, 2013, (b) Navasota Resources LTD., LLP (Navasota) dated September 27, 2013 and (c) Tauren Exploration, Inc. (Tauren) dated October 2, 2013, for the years ended December 31, 2012 and 2011 and the (unaudited) nine-months ended September 30, 2013 and 2012. The foregoing properties are referred to herein, collectively, as the Acquired Properties. The acquisitions of the Acquired Properties closed on October 2, 2013. The Company paid total cash at closing of approximately $62.5 million.
The accompanying statements of revenues and direct operating expenses of the Acquired Properties do not include indirect general and administrative expenses, interest expense, depreciation, depletion and amortization, or any provision for income taxes. The Companys management believes historical expenses of this nature incurred by Gastar, Navasota and Tauren associated with the properties are not indicative of the costs to be incurred by the Company.
Revenues in the accompanying statements of revenues and direct operating expenses are recognized based on the Acquired Properties share of any given periods production volumes and revenues received for the period. The direct operating expenses are recognized based on the Acquired Properties share of direct costs including production taxes, lifting costs, gathering, well repair and well workover costs. Direct costs do not include general corporate overhead.
Historical financial information reflecting financial position, results of operations, and cash flows of the Acquired Properties is not presented because it would be impractical and costly to obtain since such financial information was not historically prepared by Gastar, Navasota and Tauren. In addition, the Acquired Properties were part of larger enterprises prior to the acquisition by the Company, and representative amounts of indirect general and administrative expenses, depreciation, depletion and amortization, interest and other indirect costs were not necessarily allocated to the Acquired Properties, nor would such allocated historical costs be relevant to future operations of the Acquired Properties. Accordingly, the historical statements of revenues and direct operating expenses of the Acquired Properties are not indicative of the financial conditions or results of operations going forward. The historical statements of revenues and direct operating expenses of Gastar, Navasota and Taurens interest in the Acquired Properties are presented in order to substantially comply with the rules and regulations of the Securities and Exchange Commission (the SEC) for businesses acquired.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(2) Business Combination
Pursuant to the Purchase and Sale Agreements, the Company acquired approximately 29,400 net acres of Texas and Louisiana oil and gas leasehold interests from Gastar, Navasota and Tauren, including production from interests in 74 producing wells located in Texas and Louisiana, for total cash paid at closing of approximately of $62.5 million, prior to customary post-closing adjustments.
(3) Subsequent Events
In accordance with Accounting Standards Codification 865, the Company has evaluated subsequent events through December 18, 2013, the date the accompanying statements of revenue and direct operating expenses were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the accompanying statement of revenue and direct operating expenses.
(4) Supplemental Financial Information for Natural Gas and Oil Producing Activities (Unaudited)
Within the Companys Lease operating costs as part of transportation and marketing expenses, volume shortfall costs were created as part of a transaction monetizing mid-stream assets. Gastar entered into a transportation agreement with its East Texas mid-stream natural gas gathering system purchaser, requiring a certain minimum quarterly volume of natural gas production. This agreement requires Gastar to make payments for the natural gas volume shortfalls for any quarter through the autumn of 2014. Volume shortfalls required Gastar to make quarterly payments, in excess of normal transportation and marketing costs. Due to the significant change this created in monthly lease operating expenses, it has been presented separately.
The following reserve estimates as of June 30, 2012 for the properties acquired from Gastar were prepared by the Company. In preparing these reserve estimates, the Company used data previously prepared by a third party reservoir engineering firm as of December 31, 2012 and 2011, which data was provided to us by Gastar. The Companys reserve estimates as of June 30, 2012 also utilized subsequent production, extension and discovery information available to it. The Company did not receive SEC reserve reports from Navasota or Tauren, as they are private entities and are not required to obtain such reports. The Companys reserve estimates were prepared in compliance with the SEC rules and accounting standards based on the 12-month unweighted arithmetic average of the first-day-of-the-month prices as of December 31, 2012 and 2011 with appropriate adjustments by property for location, quality, gathering and marketing adjustments.
(a) Reserve Quantity Information
Proved reserves are estimated quantities of natural gas, crude oil and NGLs which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those which are expected to be recovered through existing wells with existing equipment and operating methods. Below are the net quantities of total proved reserves and proved developed reserves of the Acquired Properties. An analysis of the change in estimated quantities of reserves, all of which are located within the United States, is presented below.
The properties acquired from Navasota generally consist of additional percentage interests in the same oil and gas properties acquired from Gastar. Therefore, we estimated the proved reserves attributable to the properties acquired from Navasota as of December 31, 2012 based on the data previously prepared by a third party reservoir engineering firm as of December 31, 2012 and 2011, which data was provided to us by Gastar, but giving effect to the increased percentage interests. In order to provide reserve estimates as of June 30, 2013, the end of our latest fiscal year, we subtracted actual production from these properties for the period from January 1, 2013 through June 30, 2013 from that combined estimate as of December 31, 2012.
The properties acquired from Tauren generally consist of additional percentage interests in the same oil and gas properties previously held by us. Therefore, we estimated the proved reserves attributable to the properties acquired from Tauren as of June 30, 2013 based on the reserve report previously obtained by us covering those properties, but giving effect to the increased percentage interests.
|
|
Natural Gas |
|
Condensate and Oil |
|
NGLs |
|
Mcf (1) |
|
|
|
(Mcf) (1) |
|
(Bbls) (2) |
|
(Bbls) (2) |
|
Equivalents |
|
Change in Proved Reserves |
|
|
|
|
|
|
|
|
|
Proved developed and undeveloped reserves: |
|
|
|
|
|
|
|
|
|
Gastar (3) |
|
27,355,663 |
|
15,576 |
|
|
|
27,449,119 |
|
Navasota (3) |
|
12,499,674 |
|
15,021 |
|
|
|
12,589,800 |
|
Tauren |
|
29,586,488 |
|
411,960 |
|
1,703,101 |
|
42,276,854 |
|
Proved reserves as of December 31, 2012 |
|
69,441,825 |
|
442,557 |
|
1,703,101 |
|
82,315,773 |
|
Gastar |
|
|
|
|
|
|
|
|
|
Navasota |
|
|
|
|
|
|
|
|
|
Tauren |
|
|
|
|
|
|
|
|
|
Revisions of previous estimates |
|
|
|
|
|
|
|
|
|
Purchases of reserves in place |
|
|
|
|
|
|
|
|
|
Extensions and discoveries |
|
|
|
|
|
|
|
|
|
Gastar |
|
(1,809,528 |
) |
(6,897 |
) |
|
|
(1,850,910 |
) |
Navasota |
|
(662,773 |
) |
(4,382 |
) |
|
|
(689,065 |
) |
Tauren |
|
(47,729 |
) |
(289 |
) |
(2,139 |
) |
(62,296 |
) |
Production |
|
(2,520,030 |
) |
(11,568 |
) |
(2,139 |
) |
(2,602,271 |
) |
Disposals of reserves in place |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved reserves as of June 30, 2013 |
|
66,921,795 |
|
430,989 |
|
1,700,962 |
|
79,713,502 |
|
|
|
Natural Gas |
|
Condensate and Oil |
|
NGLs |
|
Mcf (1) |
|
|
|
(Mcf) (1) |
|
(Bbls) (2) |
|
(Bbls) (2) |
|
Equivalents |
|
Proved Developed and Undeveloped Reserves |
|
|
|
|
|
|
|
|
|
as of June 30, 2013 |
|
|
|
|
|
|
|
|
|
Gastar (3) |
|
19,299,596 |
|
8,679 |
|
|
|
19,351,670 |
|
Navasota (3) |
|
9,279,256 |
|
10,639 |
|
|
|
9,343,090 |
|
Tauren |
|
331,753 |
|
2,373 |
|
12,234 |
|
419,397 |
|
Proved Producing |
|
28,910,605 |
|
21,691 |
|
12,234 |
|
29,114,157 |
|
Gastar |
|
6,246,539 |
|
|
|
|
|
6,246,539 |
|
Navasota |
|
2,557,645 |
|
|
|
|
|
2,557,645 |
|
Tauren |
|
|
|
|
|
|
|
|
|
Proved Non-Producing |
|
8,804,184 |
|
|
|
|
|
8,804,184 |
|
Proved Developed Reserves |
|
37,714,789 |
|
21,691 |
|
12,234 |
|
37,918,341 |
|
Gastar |
|
|
|
|
|
|
|
|
|
Navasota |
|
|
|
|
|
|
|
|
|
Tauren |
|
29,207,006 |
|
409,298 |
|
1,688,728 |
|
41,795,161 |
|
Proved Undeveloped |
|
29,207,006 |
|
409,298 |
|
1,688,728 |
|
41,795,161 |
|
|
|
|
|
|
|
|
|
|
|
Total Proved Reserves |
|
66,921,795 |
|
430,989 |
|
1,700,962 |
|
79,713,502 |
|
(1) Thousand cubic feet or thousand cubic feet equivalent, as applicable
(2) Barrels
(3) The Companys reserve estimates as of June 30, 2013 also utilized subsequent production, extension and discovery information available to it.
(b) Standardized Measure of Discounted Future Net Cash Flows Relating to Oil and Natural Gas Reserves
The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves (Standardized Measure) is a disclosure requirement under Accounting Standards Codification 932-235. The Standardized Measure does not purport to be, nor should it be interpreted to present, the fair value of the proved oil and natural gas reserves of the Acquired Properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, the value of unproved properties and consideration of expected future economic and operating conditions. The estimates of future cash flows and future production and development costs are based on the 12-month unweighted first-day-of-the-month average prices as of December 31, 2012 and 2011 for natural gas, NGLs and condensate and oil, estimated future production of proved reserves and estimated future production and development costs of proved reserves, based on current costs and economic conditions. The estimated future net cash flows are then discounted at a rate of 10%. No deduction has been made for general and administrative expenses, interest expense, depreciation, depletion and amortization or federal or state income taxes.
The Standardized Measure relating to proved natural gas, NGLs and condensate and oil reserves are presented below:
|
|
Total |
|
Gastar |
|
Navasota |
|
Tauren |
|
Balances as June 30, 2013 |
|
|
|
|
|
|
|
|
|
Future cash flows |
|
308,004,032 |
|
48,195,800 |
|
22,942,162 |
|
236,866,070 |
|
Future production costs |
|
(53,392,834 |
) |
(21,278,900 |
) |
(8,423,957 |
) |
(23,689,977 |
) |
Future development costs |
|
(126,019,462 |
) |
(7,662,000 |
) |
(2,347,900 |
) |
(116,009,562 |
) |
Future severance tax expense |
|
(17,707,336 |
) |
(3,295,100 |
) |
(1,547,589 |
) |
(12,864,647 |
) |
Future income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future net cash flows |
|
110,884,400 |
|
15,959,800 |
|
10,622,716 |
|
84,301,884 |
|
|
|
|
|
|
|
|
|
|
|
Ten percent annual discount for estimated timing of net cash flows |
|
(57,004,435 |
) |
(5,574,000 |
) |
(2,223,816 |
) |
(49,206,619 |
) |
|
|
|
|
|
|
|
|
|
|
Standardized measure of discounted future net cash flows |
|
53,879,965 |
|
10,385,800 |
|
8,398,900 |
|
35,095,265 |
|
For the year ended December 31, 2012 and 2011 future cash inflows were computed using the 12-month unweighted arithmetic average of the first-day-of-the-month prices for natural gas, NGLs and condensate and oil, adjusted by lease in accordance with sales contracts and for energy content, quality, transportation, compression and gathering fees and regional price differentials. For the period indicated, the following natural gas, NGLs and condensate and oil prices were used in the calculations:
|
|
For the Year Ended |
|
For the Year Ended |
| ||
|
|
|
|
|
| ||
Natural gas, per Mcf |
|
|
|
|
| ||
Henry Hub |
|
$ |
3.62 |
|
$ |
3.25 |
|
Oil, per barrel |
|
|
|
|
| ||
WTI spot |
|
$ |
85.13 |
|
$ |
96.59 |
|
NGLs, per barrel |
|
$ |
54.99 |
|
$ |
47.46 |
|
These prices are held constant in accordance with SEC guidelines for the life of the wells included in the Companys estimates but are adjusted by lease in accordance with sales contracts and for energy content, quality, transportation, compression and gathering fees and regional price differentials.
Changes in Standardized Measure of Discounted Future Net Cash Flows
The principal sources of changes in the standardized measure of future net cash flows are as follows:
Changes in estimated standardized measure
|
|
Total |
|
Gastar |
|
Navasota |
|
Tauren |
|
Balances as of December 31, 2012 |
|
|
|
|
|
|
|
|
|
Sale of oil and gas produced |
|
(4,168,030 |
) |
(2,594,758 |
) |
(1,483,384 |
) |
(89,888 |
) |
Net changes in prices and production costs |
|
|
|
|
|
|
|
|
|
Extensions and discoveries |
|
|
|
|
|
|
|
|
|
Revision of previous quantity estimates |
|
|
|
|
|
|
|
|
|
Accretion of discount |
|
386,209 |
|
240,010 |
|
137,210 |
|
8,989 |
|
Net change in income taxes |
|
|
|
|
|
|
|
|
|
Purchases of reserves in place |
|
|
|
|
|
|
|
|
|
Disposition of reserves in place |
|
|
|
|
|
|
|
|
|
Development costs incurred that reduced future development costs |
|
|
|
|
|
|
|
|
|
Changes in future development costs |
|
|
|
|
|
|
|
|
|
Changes in timing and other changes |
|
(80,267 |
) |
(45,352 |
) |
(25,926 |
) |
(8,989 |
) |
|
|
|
|
|
|
|
|
|
|
Change in standardized measure |
|
(3,862,088 |
) |
(2,400,100 |
) |
(1,372,100 |
) |
(89,888 |
) |
|
|
|
|
|
|
|
|
|
|
Balances at beginning of year |
|
57,742,053 |
|
12,785,900 |
|
9,771,000 |
|
35,185,153 |
|
|
|
|
|
|
|
|
|
|
|
Balances as of June 30, 2013 |
|
53,879,965 |
|
10,385,800 |
|
8,398,900 |
|
35,095,265 |
|
Estimates of economically recoverable oil and natural gas reserves and of future net revenues are based upon a number of variable factors and assumptions, all of which are to some degree speculative and may vary considerably from actual results. Therefore, actual production, revenues, development and operating expenditures may not occur as estimated. The reserve data are estimates only, are subject to many uncertainties and are based on data gained from production histories and on assumptions as to geologic formations, reservoir behavior, equipment condition and other matters. Actual quantities of oil and natural gas produced in the future may differ materially from the amounts estimated.