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EXHIBIT 99.1
[Letterhead]
Ralph E. Davis Associates, Inc.
Consultants-Petroleum and Natural Gas
3555 Timmons Lane-Suite 1105
Houston, Texas 77027
(716) 622-8955
October 21, 1994
Seneca Resources Corporation
333 Clay Street, Suite 4150
Houston, Texas 77002
Attention: Mr. Emmett Wassell
General Manager
Re: Oil, Condensate and Natural Gas
Reserves and Future Net Revenues,
Certain Leaseholds of
Seneca Resources Corporation
As of October 1, 1994
Gentlemen:
At your request, the firm of Ralph E. Davis Associates, Inc. has made a study
of the oil, condensate and natural gas reserves on leaseholds in which Seneca
Resources Corporation has certain interests. This report presents our estimate
of the Proved Developed (producing and non-producing) and/or Proved Undeveloped
reserves anticipated to be produced from those leaseholds.
The reserves associated with these estimates have been classified in accordance
with the Security and Exchange Commission's Regulation S-X, Rule 4-10,
Financial Accounting and Reporting for Oil and Gas Producing Activities. We
have also estimated the non-escalated future net revenue and discounted present
value associated with those reserves ad of October 1, 1994. The present value
is presented for your information and should not be construed as an estimate of
fair market value. The results of our study may be summarized as follows:
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Seneca Resources Corp.
Mr. Emmett Wassell
October 21, 1994
Page 2
Estimated Reserves and Future Income
Net to Seneca Resources Corporation
As of October 1, 1994
Proved Reserves
Developed
Remaining Reserves Producing Non-Producing Undeveloped Total
Oil/Condensate, MBbls 6,598 3,514 7,383 17,495
Gas, MMSCF 111,093 68,197 68,157 247,447
Future Income: $1000.00
Future Gross Revenue 327,762 159,107 219,004 705,874
Operating Expense 85,018 7,094 23,428 115,540
Taxes & Trans. Expense 28,106 4,945 10,010 43,061
Future Capital Expense 21,629 18,455 54,215 94,299
Future Net Income (FNI) 193,009 128,613 131,351 452,973
FNI Discounted at 10% 122,518 78,584 81,770 282,872
Oil and condensate volumes are expressed in barrels or thousands of barrels
(MBbls) of stock tank oil and condensate. Gas volumes are expressed in
millions of standard cubic feet (MMCF) at the official temperature and pressure
bases of the areas wherein the gas reserves are located.
DISCUSSION
Calculations of reserves presented in this report were accomplished by either
volumetric or performance techniques. The bulk of basic data, including
certain logs, core analysis reports and oil and gas production records, were
provided by the client. Other information was obtained from commercial
sources. Ralph E. Davis Associates, Inc. performed no basic geologic
interpretations, but did review the geologic data and interpretations furnished
by Seneca Resources Corporation.
Proved reserves were established for all wells with zones on commercial
production, shut-in awaiting pipeline connection, shut-in awaiting recompletion
or undrilled locations on proven spacing. Schedules for future development
drilling were furnished by either Seneca Resources or the operator of the
property and were reviewed as to the reasonableness of the programs.
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Seneca Resources Corp.
Mr. Emmett Wassell
October 21, 1994
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SUMMARY CONCLUSIONS
Seneca Resources Corporation has provided access to all of its accounts,
records, geological and engineering data, reports and other information as
required for this investigation. The ownership interests, prices, product
classifications relating to prices and other factual data were accepted as
furnished without verification. No independent well tests, property
inspections, or audits of operating expenses were conducted by our staff in
conjunction with this study.
In order to estimate the reserves, costs and future revenues shown in this
report, we have relied in part on geological, engineering and economic data
furnished by Seneca Resources Corporation. Although we have a best efforts
attempt to acquire all pertinent data and to analyze it carefully with methods
accepted by the petroleum industry, there is no guarantee that the volumes of
oil or gas or the revenues projected will be realized. The reserve and revenue
projections presented in this report may require revision as additional data
become available.
No consideration was given in this report to potential environmental
liabilities which may exist, nor were any costs included for potential
liability to restore and clean up damages, if any, caused by past operating
practices.
Neither Ralph E. Davis Associates, Inc. nor its employees has any interest in
the subject properties and neither the employment to make this study nor our
compensation is contingent on our estimates of reserves and future income for
the subject properties.
This report has been prepared under the direct supervision of Allen C. Barron,
P. E., Registered Professional Engineer No. 49284, State of Texas, U.S.A.
We appreciate the opportunity to be of service to you in this matter. Any
questions or inquiries should be directed to the above.
Very truly yours,
RALPH E. DAVIS ASSOCIATES, INC.
/s/Allen C. Barron
Allen C. Barron, P. E.
Vice President
ACB:cg
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QUALIFICATIONS
The following statements relate to the attached reserve report and define both
specific items and general circumstances addressed by Ralph E. Davis,
Associates, Inc. (RED) in its analysis.
DATA SOURCE
Basic well and field data used in the preparation of this report were furnished
by Seneca Resources Corporation, the operators, or were obtained from
commercial sources. RED has accepted as correct the records as they pertain to
factual matters such as acreage controlled, the number and depths of wells,
reservoir pressure and production history, the existence of contractual
obligations to others and similar matters. Additionally, the analysis of these
properties utilized not only the basic data on the subject wells, as provided,
but also data on analogous properties as acquired by RED through its own files
and certain industry, statistical libraries. Well logs, ownership interest,
prices, and operating costs were furnished by Seneca Resources Corporation. RED
made no physical inspection of the properties nor conducted any well tests.
RESERVE ESTIMATES
In determining the estimates of oil, gas, and condensate reserves included in
this report, available data relating to pressure and production history and
geological and well test information were utilized. Reserve estimates are based
primarily upon extensive pressure or production history or were determined from
volumetric analysis or by analogy with wells in the area producing from the
same or similar formations.
The accuracy of reserve estimates is dependent upon the quality of available
data and upon the independent geological and engineering interpretation of that
data. Reserve estimates presented in this report were calculated using accepted
engineering methods and procedures and are believed to be reasonable. However,
future reservoir performance might justify revision of these estimates.
PRODUCING RATES
For the purpose of this report, estimated reserves are scheduled for recovery
on the basis of actual producing rates or appropriate well test information.
They were prepared giving consideration to engineering and geological data such
as reservoir pressures, core analysis, reservoir volumes, anticipated producing
mechanisms, the number and types of completions, as well as the past
performance of analogous reservoirs.
These and other future rates may be subject to regulation by various agencies
or changes in market demand or other factors; consequently, reserves actually
recovered and the real rates of recovery may vary from the estimates included
herein.
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PRICING PROVISIONS
Crude Oil and Condensate - Unit prices used throughout this report for crude
oil and condensate are those specific prices being received by the company
where properties are currently being produced. Prices for liquid reserves
scheduled for initial production at some future date were estimated from
current prices on the same property. Liquid prices were held constant
throughout the producing life of the properties.
Natural Gas - Unit prices used throughout this report for natural gas are those
specific prices being received by the company where properties are currently
being produced. Adjustments for BTU content and tax reimbursement were taken
into account where appropriate. Prices for other gas reserves scheduled for
initial production at some future date were estimated from current prices on
the same property. Gas prices were held constant throughout the producing life
of the properties.
FUTURE NET INCOME
Future net income or net cash flow is based upon gross income from future
production, less direct lease operating expenses and taxes (production,
severance, ad valorem or other). Estimated future capital for development and
workover costs were also deducted from gross income at the time they will be
expended. No allowance was made for depletion, depreciation, income taxes or
administrative expense.
Direct lease operating expense includes direct costs of operations of each
lease or an estimated value for future operations based upon analogous
properties. No direct lease operating expense or taxes have been included in
the cash flow schedules of those wells which currently have no economic
reserves. Neither capital costs for drilling and/or major workover expense nor
operating costs were escalated. Neither the cost to abandon onshore properties
nor the salvage value of equipment was considered in this report.
Future net income has been discounted for present worth at values ranging from
0 to 100 percent using continuous discounting. In this report the future net
income is discounted at a primary rate of ten (10.0) percent.