Exhibit 99.1 - 32 -
NORTH EUROPEAN OIL ROYALTY TRUST
ESTIMATE OF REMAINING
PROVED PRODUCING RESERVES
IN THE NORTHWEST BASIN OF THE
FEDERAL REPUBLIC OF GERMANY
AS OF
OCTOBER 1, 1996
RALPH E. DAVIS ASSOCIATES, INC.
HOUSTON, TEXAS DECEMBER, 1996
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T A B L E O F C O N T E N T S
--------------------------------
Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Description of Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Limitations of Available Data . . . . . . . . . . . . . . . . . . . . . . . .3
Oldenburg Area - Sales and Reserves . . . . . . . . . . . . . . . . . . . . .4
Net Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 1 . . . . .Reserve Summary and Five Year
Net Sales History . . . . . . . . . . . . . . . . . . . . . 7
Certificate of Qualification . . . . . . . . . . . . . . . . . . . . . . . . 8
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Ralph E. Davis Associates, Inc.
Consultants - Petroleum and Natural Gas
3555 Timmons Lane - Suite 1105
Houston, Texas 77027
(713) 622-8955
December 18, 1996
The Trustees of
North European Oil Royalty Trust
P. O. Box 456
Red Bank, New Jersey 07701
Gentlemen:
In accordance with your request, we have prepared a report of the
estimated remaining proved producing reserves attributable to the overriding
royalty interest of North European Oil Royalty Trust (the "Trust" or "NEORT")
in the Northwest German Basin of the Federal Republic of Germany as of October
1, 1996 (the "Reserve Report"). The proved producing reserves are as of
October 1, 1996 and the reported sales are for the twelve month period ending
September 30, 1996. The use of the period ending September 30, 1996 is
consistent with prior years and allows the timely calculation of the royalty
reserves and the cost depletion percentage.
In annual reserve reports prepared for the Trust prior to 1992, reserve
estimates were presented for the Trust's interests in fields located in the
Alpine Foreland Area of Bavaria and other non-Oldenburg areas. Reports from
1992 forward omit such estimates. The Trust continues to receive royalty
payments from these interests. However, these royalties represent less than
two (2) percent of the Trust's total royalties and the expenses involved in
the determination of reserve estimates for these interests are not warranted
by the royalties received. We will continue to monitor the quarterly
statements and if increases are noted that could add reserves to the Trust, we
will resume estimating future reserves.
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The Trust normally receives from Mobil Oil A.G. ("Mobil"), the
German subsidiary of Mobil Corp., a 2% royalty on gross receipts from sales of
sulfur obtained as a by-product of sour gas produced from the western portion
of Oldenburg. This agreement is subject to an escalation clause which
provides that if Mobil's selling price is below the escalated base price,
payment of royalties is deferred until such time as the selling price again
exceeds the escalated base price. Throughout fiscal 1996, Mobil's selling
price was below the escalated base price. We will continue to monitor this
situation, but until the point that Mobil's selling price again exceeds the
escalated base price, reserves subject to this royalty will not be included in
overall reserve calculations.
DESCRIPTION OF HOLDINGS
-----------------------
The Trust holds various overriding royalty rights on sales of gas,
sulfur and oil from certain concessions and leases in the Federal Republic of
Germany. The Oldenburg concession (1,398,000 acres), covering virtually the
entire former State of Oldenburg and located in the State of Lower Saxony, is
the major source of royalty income for the Trust. Although the Trust holds
overriding royalty rights on other areas outside the Oldenburg concession, the
reserve calculations for this year do not include reserves from these areas
due to the low level of royalty income and intermittent production.
1. The Oldenburg concession is held by Oldenburgische Erdol
Gesellschaft ("OEG"). Within this concession Mobil and BEB
Erdgas und Erdol GmbH ("BEB"), a joint venture of Exxon Corp.
and Royal Dutch Group, carry out all exploration, drilling,
production and sales activities.
(a) Under one series of rights covering the western part of
the Oldenburg concession (approximately 662,000 acres),
the Trust receives a royalty payment of 4% on gross
receipts from sales by Mobil of natural gas, casinghead
gas, crude oil and condensate. The Trust also receives
from Mobil a 2% royalty payment on gross receipts of sales
of sulfur obtained as a by-product of sour gas produced
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from the western part of Oldenburg. The payment of
the sulfur royalty is conditioned upon sales by Mobil of
sulfur at a selling price above an agreed upon base
price, which base price is adjusted by an inflation
index. Where the average selling price falls below the
adjusted base price, no royalties are payable.
(b) Under another series of rights covering the entire
Oldenburg concession and pursuant to an agreement with OEG
(the "OEG Agreement"), the Trust receives royalties at the
rate of 0.6667% on gross receipts from sales of natural
gas, casinghead gas, crude oil, condensate and sulfur
(removed during the processing of sour gas) less 50% of an
escalating cost base. This cost base is recomputed
annually based on indexes reflecting changes in certain
prices within Germany. This system will be revised in
2002 unless the escalating cost base diverges
significantly from the actual production costs, in which
case the system will be revised in 1999. In either case,
the revised system provides that 50% of field handling,
treatment and transport costs, as reported for state
governmental royalty purposes, will be deducted from gross
sales receipts prior to the royalty calculation.
LIMITATIONS OF AVAILABLE DATA
-----------------------------
The reserves considered in this report are defined as proved
producing reserves. Proved producing reserves are limited to those quantities
which can be expected to be recoverable commercially from known reservoirs at
current prices and costs, under existing regulatory practices and with
existing conventional equipment and operating methods. Proved producing
reserves do not include either proved developed non-producing reserves or any
class of probable reserves.
The reserve estimates were prepared using engineering methods generally
accepted by the petroleum industry. The reliability of any reserve estimate
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is a function of the quality of available information and of engineering
interpretation and judgment.
The Trust, as an overriding royalty interest owner, is not entitled
to receive proprietary data from the various operators on producing wells.
Data (such as logs, core analysis, reservoir tests, pressure tests, gas
analyses, geologic maps, and individual well production histories, which are
used in volummetric and material balance type reserve estimates) are not
available to the Trust.
The Trust receives various monthly and quarterly statements that
report production, sales and revenue data from the operators. Utilizing the
same procedures as in prior years, this information, plus published
information received from W.E.G. (a German organization comparable to the
American Petroleum Institute or the American Gas Association), has been used
to prepare this annual report. We believe the reserve estimates prepared
using this data represent realistic values. However, due to the limitation of
data, this estimate of reserves can not have the same degree of accuracy that
an estimate of reserves prepared using all pertinent data would have. Our
experience in the evaluation of reserves using such limited data compensates
somewhat for the limitations of available data.
The data in the reports received by the Trust is in metric tons and
cubic meters. The following Metric to English Unit conversion factors were
used:
Oil: 7.23 barrels per metric ton
Gas: 37.25 cubic feet per cubic meter at 14.7 psia
and 60 degrees Fahrenheit
Sulfur: 1.1 short tons per metric ton
OLDENBURG AREA - SALES AND RESERVES
------------------------------------
The Trust's royalty income comes primarily from the Oldenburg area.
Gas production accounts for the majority of the income; however, the high
hydrogen sulfide content of much of the gas produced necessitates its removal
before the gas can be sold.
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The facilities at the Grossenkneten desulfurization plant are the primary
means by which the hydrogen sulfide is removed. Following renovations and
improvements to the plant in 1994 and again in 1996, the plant's input
capacity has been increased from 600,000 cu. meters per hour to its present
capacity of 750,000 cu. meters per hour. In 1994, a 60 Km. pipeline
connecting the Oldenburg concession with the NEAG desulfurization plant was
completed. Initially, this pipeline provided access to additional and excess
capacity at NEAG of up to approximately 90,000 cu. meters per hour. However,
following the development of additional reserves outside the Oldenburg
concession this former excess capacity will not be available for the
processing of Oldenburg gas for some period of time.
During the 12 months ending September 30, 1996 total sales for the
Oldenburg area were 333,997 barrels of oil and condensate, 174,970 million
cubic feet (MMcf) of non-associated gas, 332 MMcf of associated gas and
828,804 short tons of sulfur. The sales from the western portion of
Oldenburg, where the Trust has a greater interest, were 188,859 barrels of
condensate and oil, 63,188 MMcf of non-associated gas, 133 MMcf of associated
gas and 208,661 short tons of sulfur.
Estimated gross remaining proved producing reserves attributable to
the total Oldenburg area are 3,504,974 barrels of condensate and oil,
2,152,001 MMcf of non-associated gas, 3,392 MMcf of associated gas and
9,479,718 short tons of sulfur.
NET RESERVES
------------
To present an accurate picture of estimated proved producing
reserves net to the Trust, the gross reserve figures outlined above must be
modified by the impact of the different royalty rates in effect in the
Oldenburg concession. A comparison of the Trust's overriding royalty rates in
both the western and eastern areas of Oldenburg is as follows:
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Mobil Oil A. G. West East
--------------- ---- ----
Oil & Gas 4% 0%
Sulfur 2%* 0%
BEB
---------------
Oil & Gas 0.6667%** 0.6667%**
Sulfur 0.6667%** 0.6667%**
*Temporarily suspended. (See explanation above.)
**Prior to the calculation of royalties, a portion of the field
handling, transport and manipulation costs for products produced
and sold is deducted.
The application of these royalty rates to the estimated gross
remaining proved producing reserves attributable to the western and eastern
Oldenburg areas yields the combined estimated proved producing reserves net to
the Trust. As of October 1, 1996, these figures stand at 89,141 barrels of
oil and condensate, 40,644 MMcf of gas and 48,754 short tons of sulfur.
A summary of net proved producing reserves by product and a five
year history of net sales attributable to the royalty interests of the Trust
are presented in Table 1.
Sincerely yours,
RALPH E. DAVIS ASSOCIATES, INC.
/s/ Larry A. Barnett
-------------------------------
Larry A. Barnett, P. E.
Senior Vice-President
LAB:sw
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TABLE 1
NORTH EUROPEAN OIL ROYALTY TRUST
RESERVE SUMMARY AND FIVE YEAR NET SALES HISTORY
ESTIMATED NET PROVED PRODUCING RESERVES
AS OF OCTOBER 1, 1996
OLDENBURG
Oil/Cond. Associated Non-Associated Sulfur
Gas Gas
Barrels MMcf MMcf Short Tons
-------- ---------- -------------- ----------
89,141 62 40,644 48,754**
**Note: At current prices, no royalties are presently
being paid under the Mobil sulfur royalty.
FIVE YEAR NET SALES SUMMARY
12 MONTHS ENDING SEPTEMBER 30
OLDENBURG
Oil/Cond. Associated Non-Associated Sulfur
Gas Gas
Barrels MMcf MMcf Short Tons
-------- ---------- -------------- ----------
1996 9,348 8 3,450 4,268**
1995 9,226 8 4,098 4,081**
1994 8,984 11 3,681 2,391**
1993 10,550 18 4,031 3,790**
1992 10,100 10 4,056 8,102
**Note: At current prices, no royalties are presently
being paid under the Mobil sulfur royalty.
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CERTIFICATE OF QUALIFICATION
I, Larry A. Barnett, Registered Professional Engineer, do hereby
certify:
1. That I am senior vice-president of the consulting firm of Ralph E.
Davis Associates, Inc. with offices at 3555 Timmons Lane, Suite
1105, Houston, Texas 77027.
2. That I have prepared a reserve report on the interests of the North
European Oil Royalty Trust in the Northwest Basin of the Federal
Republic of Germany for the twelve month period ending September 30,
1996.
3. That I have no direct or indirect interest, nor do I expect to
receive any direct or indirect interest, in the properties or in any
securities of the North European Oil Royalty Trust.
4. That I attended The University of Texas and that I graduated with a
Bachelor of Science Degree in Petroleum Engineering in 1958.
5. That I am a Registered Professional Engineer in the States of Texas
and Louisiana, Registration Numbers 23399 and 9647 respectively, and
that I am a member in good standing of the Society of Petroleum
Engineers, the Society of Petroleum Evaluation Engineers and the
Society of Professional Well Log Analysts.
6. That I have in excess of thirty-five years experience in the
evaluation of oil and gas properties in the United States, Canada,
Mexico, South America and Germany, and that I have been practicing
as a consultant in petroleum engineering and geology since 1987.
RALPH E. DAVIS ASSOCIATES, INC.
/S/ Larry A. Barnett
-------------------------------
Larry A. Barnett, P. E.
Senior Vice-President
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