EXHIBIT 99.1
February 3, 1998
Snyder Oil Corporation
Suite 2500
777 Main Street
Fort Worth, Texas 76102
Gentlemen:
In accordance with your request, we have estimated the proved reserves and
future revenue, as of December 31, 1997, to the Snyder Oil Corporation (SOCO)
interest in certain oil and gas properties located in the United States and in
federal waters offshore Louisiana and Texas as listed in the accompanying
tabulations. As requested, lease and well operating costs do not include the
per-well overhead expenses allowed under joint operating agreements for those
properties operated by SOCO. This report has been prepared using constant prices
and costs and conforms to the guidelines of the Securities and Exchange
Commission (SEC).
As presented in the accompanying summary projections, Tables I through IV,
we estimate the net reserves and future net revenue to the SOCO interest, as of
December 31, 1997, to be:
Net Reserves Future Net Revenue
-------------------------- ---------------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- --------------------------------- ----------- ----------- ------------- -------------
Proved Developed
Producing 6,485,719 198,844,328 $329,204,500 $212,339,000
Non-Producing 1,027,884 55,469,307 126,347,000 81,955,500
Proved Undeveloped 512,747 64,668,474 60,158,600 23,454,100
---------- ----------- ------------ ------------
Total Proved 8,026,350 318,982,109 $515,710,100 $317,748,600
The oil reserves shown include crude oil and condensate. Oil volumes are
expressed in barrels which are equivalent to 42 United States gallons. Gas
volumes are expressed in thousands of standard cubic feet (MCF) at the contract
temperature and pressure bases.
As shown in the Table of Contents, the properties in this report have been
subdivided into significant property groups and project areas behind the
appropriate division tabs. Included for each significant property group are
summary projections of reserves and revenue by reserve category. Included for
each project area are summary projections of reserves and revenue by reserve
category along with one-line summaries of reserves, economics, and basic data by
lease. For the purposes of this report, the term "lease" refers to a single
economic projection.
The estimated reserves and future revenue shown in this report are for
proved developed producing, proved developed non-producing, and proved
undeveloped reserves. In accordance with SEC guidelines, our estimates do not
include any value for probable or possible reserves which may
exist for these properties. This report does not include any value which could
be attributed to interests in undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated.
Future gross revenue to the SOCO interest is prior to deducting state
production taxes and ad valorem taxes. Future net revenue is after deducting
these taxes, future capital costs, and operating expenses, but before
consideration of federal income taxes; future net revenue for the offshore
properties is also after deducting abandonment costs. In accordance with SEC
guidelines, the future net revenue has been discounted at an annual rate of 10
percent to determine its "present worth. " The present worth is shown to
indicate the effect of time on the value of money and should not be construed as
being the fair market value of the properties.
For the purposes of this report, a field inspection of the properties has
not been performed nor has the mechanical operation or condition of the wells
and their related facilities been examined. We have not investigated possible
environmental liability related to the properties; therefore, our estimates do
not include any costs which may be incurred due to such possible liability. Our
estimates of future revenue do not include any salvage value for the lease and
well equipment nor the cost of abandoning the onshore properties. Future revenue
estimates for offshore properties also do not include any salvage value for the
lease and well equipment, but do include our estimates of the costs to abandon
the wells, platforms, and production facilities. Abandonment costs for offshore
properties are included with other capital investments.
Oil prices used in this report are based on a December 31, 1997 West Texas
Intermediate posted price of $15.50 per barrel, adjusted by significant property
group for regional posted price differentials. Gas prices used in this report
are based on average December 1997 prices by pipeline for each significant
property group. Oil and gas prices are held constant in accordance with SEC
guidelines.
Lease and well operating costs are based on operating expense records of
SOCO. For non- operated properties, these costs include the per-well overhead
expenses allowed under joint operating agreements along with costs estimated to
be incurred at and below the district and field levels. As requested, lease and
well operating costs for the operated properties include only direct lease and
field level costs. Headquarters general and administrative overhead expenses of
SOCO are not included. Lease and well operating costs are held constant in
accordance with SEC guidelines. Capital costs are included as required for
workovers, new development wells, and production equipment.
We have made no investigation of potential gas volume and value imbalances
which may have resulted from overdelivery or underdelivery to the SOCO interest.
Therefore, our estimates of reserves and future revenue do not include
adjustments for the settlement of any such imbalances; our projections are based
on SOCO receiving its net revenue interest share of estimated future gross gas
production.
The reserves included in this report are estimates only and should not be
construed as exact quantities. They may or may not be recovered; if recovered,
the revenues therefrom and the costs
related thereto could be more or less than the estimated amounts. The sales
rates, prices received for the reserves, and costs incurred in recovering such
reserves may vary from assumptions included in this report due to governmental
policies and uncertainties of supply and demand. Also, estimates of reserves may
increase or decrease as a result of future operations.
In evaluating the information at our disposal concerning this report, we
have excluded from our consideration all matters as to which legal or
accounting, rather than engineering and geological, interpretation may be
controlling. As in all aspects of oil and gas evaluation, there are
uncertainties inherent in the interpretation of engineering and geological data;
therefore, our conclusions necessarily represent only informed professional
judgments.
The titles to the properties have not been examined by Netherland, Sewell
& Associates, Inc., nor has the actual degree or type of interest owned been
independently confirmed. The data used in our estimates were obtained from
Snyder Oil Corporation and the nonconfidential files of Netherland, Sewell &
Associates, Inc. and were accepted as accurate. We are independent petroleum
engineers, geologists, and geophysicists; we do not own an interest in these
properties and are not employed on a contingent basis. Basic geologic and field
performance data together with our engineering work sheets are maintained on
file in our office.
Very truly yours,
/s/ Frederic D. Sewell
RKG:AKC