Exhibit 99.2 - 42 -
NORTH EUROPEAN OIL ROYALTY TRUST
CALCULATION OF COST DEPLETION PERCENTAGE
For 1996 Tax Year
RALPH E. DAVIS ASSOCIATES, INC.
HOUSTON, TEXAS DECEMBER, 1996
- 43 -
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
September 30, 1996 (the "Reserve Report"). The Reserve Report forms the basis
on which this report, the Calculation of the Cost Depletion Percentage for the
1996 Calendar Year (the "Cost Depletion Report"), is made. As detailed in
Attachment A, the total cost depletion percentage to be taken for the twelve
month period ending December 31, 1996 is 7.891 percent.
In the 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.
Reserves and net sales for these areas were used in the calculation of cost
depletion in those prior years. Reports since 1992 do not include 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. The exclusion of these reserves does not have a material efffect on
the calculation of the cost depletion percentage.
- 44 -
The Trust's estimated remaining net proved producing reserves as of
October 1, 1996 and net sales for the twelve month period ending September 30,
1996 are as follows:
Reserves Sales
-------- -----
Oil, Barrels 89,141 9,348
Associated Gas, MMcf 62 8
Non-Associated Gas, MMcf 40,644 3,450
Sulfur, Short Tons 45,311** 4,268**
(MMcf = million cubic feet @ 14.7 psia and 60 degrees Fahrenheit)
** Note: At current price levels no royalties are being paid under
the Mobil sulfur royalty.
Computation of Total Cost Depletion Percentage
----------------------------------------------
The categories of reserves considered in the computation of total
cost depletion percentage are oil, associated gas and non-associated gas.
Sulfur is a by-product of the gas production and is not considered in the cost
depletion calculation. For each category of reserves, a cost base for the
Trust was established as of January 1, 1976. This cost base is adjusted
(reduced) each year by an amount of depletion that is calculated by
multiplying the remaining cost base at the beginning of the current year by a
unit cost depletion factor. The unit cost depletion factor is the ratio of
the net sales during the current year to the adjusted net proved producing
reserves at the beginning of the current year.
Significant items in the cost depletion percentage calculation that
appear on Attachment A as specific item numbers ( ) and their sources are as
follows:
The cost base as of 1-1-95 (2) and the depletion taken during 1995
(3) were obtained from the previous year's report. The cost base as of 1-1-96
(4) forms the initial starting point for the calculation of the cost depletion
percentage for the 1996 tax year. The cost base for 1-1-96 (4) then is
(2) - (3).
- 2 -
- 45 -
The adjusted net proved producing reserves as of 10-1-95 (8) is
obtained by adding the net sales (7) to the estimated remaining net proved
producing reserves as of 10-1-96 (6). Therefore (8) = (6) + (7).
The unit cost depletion factor (10) is obtained by dividing the net
sales (7) by the adjusted net proved producing reserves as of 10-1-95 (8).
Therefore (10) = (7) / (8).
The cost depletion to be taken for each category of reserves (11)
that is used to reduce the original cost base each year then is the product of
the unit cost depletion factor (10) multiplied by the cost base as of 1-1-96
(4). Therefore (11) = (4) x (10).
The total NEORT or Trust cost depletion percentage (12) then is the
sum of the cost depletion to be taken for each category Sum (11) divided by
the sum of the cost base as of 1-1-96 for each category Sum (4). Therefore
(12) = Sum (11) / Sum (4).
The Trust's total cost depletion percentage represents the allowable
cost depletion for the current tax year, expressed as a percentage of the cost
base at the beginning of the tax year.
Sincerely yours,
RALPH E. DAVIS ASSOCIATES, INC.
/S/ Larry A. Barnett, P. E.
-------------------------------
Larry A. Barnett, P. E.
Senior Vice-President
LAB:sw
- 3 -
- 46 -
ATTACHMENT A
NORTH EUROPEAN OIL ROYALTY TRUST
COMPUTATION OF COST DEPLETION PERCENTAGE
For the Year Ending December 31, 1996
OLDENBURG
-----------------------------------------
1. Product Associated Non-Assoc.
Oil Gas Gas
Barrels MMCF MMCF
-------- ---------- ----------
NEORT COST BASE ALLOCATION (%)
- -------------------------------
2. Cost base as of 1-1-95 0.66294 0.05698 18.68911
3. Less depletion taken during 1995 0.06654 0.00651 1.74032
4. Cost base as of 1-1-96 0.59640 0.05047 16.94879
NEORT NET RESERVES (Barrels of Oil and Million Cubic Feet)
- -----------------------------------------------------------
5. Estimated remaining net proved
producing reserves as of 10-1-95 82,687 62 39,910
6. Estimated remaining net proved
producing reserves as of 10-1-96 89,141 62 40,644
7. Net sales from 10-1-95 to 9-30-96 9,348 8 3,450
8. Adjusted net proved producing
reserves as of 10-1-95 98,489 70 44,094
9. Adjustments to reserves during period 15,802 8 4,184
COST DEPLETION CALCULATION (%)
- -------------------------------
10. Unit cost depletion factor 0.09491 0.11429 0.07824
11. 1996 cost depletion to be taken 0.05661 0.00577 1.32611
12. Total NEORT cost depletion percentage = 7.891 Percent of 1-1-96 cost base
Footnotes:
Line (2) from 1995 depletion computations Line (8) = Line (6) + Line (7)
Line (3) from 1995 depletion computations Line (9) = Line (8) - Line (5)
Line (4) = Line (2) - Line (3) Line (10) = Line (7) / Line (8)
Line (5) from reserves review as of 10-1-95 Line (11) = Line (10) x Line (4)
Line (6) from reserves review as of 10-1-96 Line (12) = Sum (11) / Sum (4)
Line (7) from OEG and MOBIL statements