OPERATING EXPENSES & CAPITAL COSTS
It is the opinion of Haas Engineering that, in most cases, the lease operating costs used in this evaluation represent the average of recent historical monthly operating costs. In cases where historical costs were not available or deemed to be unreliable, operating costs were estimated based on knowledge of analogous wells producing under similar conditions. The lease operating expenses in this report represent field level operating costs.
Where available, capital costs were estimated using recent historical information reported for analogous expenditures. Where recent historical information was not available, Fleur De Lis has provided estimated capital costs, which were reviewed by Haas Engineering and found to be reasonable. For the purpose of this report, salvage value for each project was assumed to be equal to the abandonment costs.
Operating expenses for the period of January 1, 2020 through December 31, 2020 was generally used in this evaluation. Operating expenses and capital costs were not escalated in this evaluation.
DISCLAIMERS
It should be understood that this evaluation relies on diligence performed during the September 1, 2020 SEC Audit. The details of that review can be found in the report “Appraisal of Certain Oil and Natural Gas Interests Located in Ector County, Texas, as of September 1, 2020”, with the letter dated September 16, 2020. It should be noted that additional diligence was performed during this review including inspection with updated production data, updated Lease Operating Statements, pricing changes, and any contractual changes. It is Haas Engineering’s opinion that the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for this purpose.
It should be noted that this evaluation contains cases with negative FNI, largely due to abandonment costs. The inclusion of these cases has minimal impact on the overall evaluation and does not exceed the tolerance for compliance with the Audit standard.
The Proved Reserves presented in this report are 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. Because of governmental policies and uncertainties of supply and demand, the product prices and the costs incurred in recovering these Reserves may vary from the price and cost assumptions in this report. Because these estimates are based on existing governmental regulations, changes could affect the ability to recover these Reserves. In any case, quantities of Reserves may increase or decrease as a result of future operations.
Reserves estimates for individual properties included in this report are only valid when considered within the context of the overall report and should not be considered independently. The future net income and net present value estimates contained in this report do not represent an estimate of fair market value.
All information pertaining to the operating expenses, prices, and the interests of Fleur De Lis in the properties appraised has been accepted as represented. It was not considered necessary to make a field examination of the appraised properties. Data used in performing this appraisal were obtained from Fleur De Lis, public sources, and our own files. Supporting work papers pertinent to the appraisal are retained in our files and are available to you or designated parties at your convenience.
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