RALPH E. DAVIS ASSOCIATES, INC.
CONSULTANTS-PETROLEUM AND NATURAL GAS
3555 TIMMONS LANE-SUITE 1105
HOUSTON, TEXAS 77027
(713) 622-8955
October 19, 1999
Seneca Resources Corporation
1201 Louisiana, Suite 400
Houston, Texas 77002
Attention: Mr. Don A. Brown
Vice President
Re: Oil, Condensate and Natural Gas Reserves, Seneca
Resources Corporation As of October 1, 1999
Gentlemen:
At your request, the firm of Ralph E. Davis Associates, Inc. has audited an
evaluation of the proved oil, condensate and natural gas reserves on leaseholds
in which Seneca Resources Corporation has certain interests. This report
presents a summary of the Proved Developed (producing and non-producing) and
Proved Undeveloped reserves anticipated to be produced from Seneca Resources'
interest.
Liquid volumes are expressed in thousands of barrels (MBbls) of stock tank oil.
Gas volumes are expressed in millions of standard cubic feet (MMSCF) at the
official temperature and pressure bases of the areas wherein the gas reserves
are located.
The summarized results of the reserve audit are as follows:
RALPH E. DAVIS ASSOCIATES, INC.
Seneca Resources Corp.
Mr. Don A. Brown
October 19, 1999
Page 2
Estimated Proved Reserves
Net to Seneca Resources Corporation
As of October 1, 1999
Proved Reserves
--------------------------------------------
Developed
-----------------------
Remaining Reserves Producing Non-Producing Undeveloped Total
East Coast Division:
Oil/Condensate, MBbls 77 0 0 77
Gas, MMSCF 78,910 178 0 79,088
Gulf Coast Division:
Oil/Condensate, MBbls 2,527 1,805 2,903 7,235
Gas, MMSCF 40,388 61,890 19,294 121,572
West Coast Division:
Oil/Condensate, MBbls 50,046 2,879 15,583 68,508
Gas, MMSCF 35,397 6,166 78,568 120,131
TOTAL:
Oil/Condensate, MBbls 52,650 4,684 18,486 75,820
Gas, MMSCF 154,695 68,234 97,862 320,791
DISCUSSION:
The scope of this study was to audit the proved reserves attributable to the
interests of Seneca Resources Corporation. Reserve estimates were prepared by
Seneca using acceptable evaluation principals for each source. The quantities
presented herein are estimated reserves of oil, condensate and natural gas that
geologic and engineering data demonstrate can be recovered from known reservoirs
under existing economic conditions with reasonable certainty.
Ralph E. Davis Associates, Inc. has audited the reserve estimates, the data
incorporated into preparing the estimates and the methodology used to evaluate
the reserves. In each of Seneca's producing divisions all 1999 additions and
those properties of significant value were reviewed by Ralph E. Davis. Reserve
estimates of current producing zones, productive zones behind pipe and undrilled
well locations were reviewed in detail. Certain changes to either
RALPH E. DAVIS ASSOCIATES, INC.
Seneca Resources Corp.
Mr. Don A. Brown
October 19, 1999
Page 3
individual reserve estimates or the categorization of reserves were suggested by
Ralph E. Davis Associates, Inc. and accepted by Seneca Resources. It is our
opinion that the reserves presented herein meet all the criteria of Proved
Reserves.
Neither Ralph E. Davis Associates, Inc. nor any of its employees have any
interest in Seneca Resources Corporation or the properties reported herein. The
employment and compensation to make this study are not contingent on our
estimate of reserves.
We appreciate the opportunity to be of service to you in this matter, and will
be glad to address any questions or inquiries you may have.
Very truly yours,
RALPH E. DAVIS ASSOCIATES, INC.
/s/ Allen C. Barron
Allen C. Barron, P. E.
Vice President
RALPH E. DAVIS ASSOCIATES, INC.
CLASSIFICATION OF RESERVES
Proved Oil and Gas Reserves
Proved oil and gas reserves are the estimated quantities of crude oil, natural
gas, and natural gas liquids which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions.
1. Reservoirs are considered proved if economic producibility is
supported by either actual production or conclusive formation test.
The area of a reservoir considered proved includes (A) that portion
delineated by drilling and defined by gas-oil and/or oil-water
contacts, if any; and (B) the immediately adjoining portions not yet
drilled, but which can be reasonably judged as economically productive
on the basis of available geological and engineering data. In the
absence of information on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of the
reservoir.
2. Reserves which can be produced economically through application of
improved recovery techniques (such as fluid injection) are included in
the "proved" classification when successful testing by a pilot
project, or the operation of an installed program in the reservoir,
provides support for the engineering analysis on which the project or
program was based.
3. Estimates of proved reserves do not include the following: (A) oil
that may become available from known reservoirs but is classified
separately as "indicated additional reserves"; (B) crude oil, natural
gas, and natural gas liquids, the recovery of which is subject to
reasonable doubt because of uncertainty as to geology, reservoir
characteristics, or economic factors; (C) crude oil, natural gas, and
natural gas liquids, that may occur in undrilled prospects; and (D)
crude oil, natural gas, and natural gas liquids, that may be recovered
from oil shales, coal, gilsonite and other such sources.
Proved Developed Reserves
Proved developed oil and gas reserves are reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
Additional oil and gas expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing the natural
forces and mechanisms of primary recovery should be included as "proved
developed reserves" only after testing by a pilot project or after the operation
of an installed program has confirmed through production response that increased
recovery will be achieved.
Proved Undeveloped Reserves
Proved undeveloped oil and gas reserves are reserves 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. Reserves on undrilled
acreage shall be limited to those drilling units offsetting productive units
that are reasonably certain of production when drilled. Proved reserves for
other undrilled units can be claimed only where it can be demonstrated with
certainty that there is continuity of production from the existing productive
formation.