1
EXHIBIT 23-A
CONSENT
As independent petroleum and natural gas consultants, we
hereby consent to the filing of this Letter Report in its entirety as an
Exhibit to the 1993 Annual Report of The Columbia Gas System, Inc., to the
Securities and Exchange Commission on Form 10-K, and any Registration Statement
of The Columbia Gas System, Inc., relating to the issue of securities to the
public during 1995; to the quotation or summarization of portions of this
Letter Report, subject to our approval of the related page(s) of the
document(s), in the 10-K, the Prospectus included in said Registration
Statement(s) or the 1994 Annual Report to Stockholders; and, subject to
approval of the related page(s) of the document(s), to the use of our name and
the reliance upon our authority as experts in said Annual Report to
Stockholders, Form 10-K and Prospectus(es) and in Part II of said Registration
Statement(s). We have no interest of a substantial or material nature in The
Columbia Gas System, Inc., or in any affiliate, nor are we to receive any such
interest as payment for the preparation of this Letter Report; we have not been
employed for such preparation on a contingent fee basis; and we are not
connected with The Columbia Gas System, Inc., or any affiliate as a promoter,
underwriter, voting trustee, director, officer, employee, or affiliate.
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
February 3, 1995
2
January 24, 1995
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, Delaware 19807
Attention: Mr. Jeffrey Grossman, Assistant Controller
Arthur Andersen & Company
1345 Avenue of the Americas
New York, New York 10105
Attention: Mr. J. M. Sepanski
Gentlemen:
The estimated reserve volumes and future income amounts
presented in this report are related to hydrocarbon prices. December 1994
hydrocarbon prices were used in the preparation of this report as required by
Securities and Exchange Commission (SEC) and Financial Accounting Standards
Bulletin No. 69 (FASB 69) guidelines; however, actual future prices may vary
significantly from December 1994 prices. Therefore, volumes of reserves
actually recovered and amounts of income actually received may differ
significantly from the estimated quantities presented in this report.
Our estimates of the net proved reserves attributable to the
interests of The Columbia Gas System, Inc. (referred to herein as the Company)
as of December 31, 1994 are presented below. Table 1 is a tabulation of the
oil, gas, and natural gas liquid reserves by subsidiary. The Company's
reserves are located in the United States and the Federal Offshore waters.
Proved Net Reserves
As of December 31, 1994
------------------------------------------
Liquid, Barrels Gas, MMCF
----------------- -----------------
Developed and Undeveloped 12,254,925 683,768
Developed 11,504,250 543,346
The "Liquid" reserves shown above are comprised of crude oil,
condensate, and natural gas liquids. Natural gas liquids comprise 13.3 percent
of the Company's developed liquid reserves and 12.5 percent of the Company's
developed and undeveloped liquid reserves. All hydrocarbon liquid reserves are
expressed in standard 42 gallon barrels. All gas volumes are sales gas
expressed in MMCF at the pressure and temperature bases of the area where the
gas reserves are located.
In accordance with the requirements of FASB 69, our estimates
of the Company's net proved reserves as of December 31, 1991, 1992, 1993, and
1994, as contained in this report and our previous reports, are presented in
attached Table No. 2 together with a tabulation of the components of the
differences in the estimates as of such dates.
The proved reserves presented in this report comply with the
SEC's Regulation S-X Part 210.4-10 Sec. (a) as clarified by subsequent
Commission Staff Accounting Bulletins, and are based on the following
definitions and criteria:
3
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 24, 1995
Page 2
Proved reserves of crude oil, condensate, natural gas, and
natural gas liquids are estimated quantities that geological and
engineering data demonstrate with reasonable certainty to be recoverable
in the future from known reservoirs under existing conditions.
Reservoirs are considered proved if economic producibility is supported
by actual production or formation tests. In certain instances, proved
reserves are assigned on the basis of a combination of core analysis and
electrical and other type logs which indicate the reservoirs are
analogous to reservoirs in the same field which are producing or have
demonstrated the ability to produce on a formation test. The area of a
reservoir considered proved includes (1) that portion delineated by
drilling and defined by fluid contacts, if any, and (2) the adjoining
portions not yet drilled that can be reasonably judged as economically
productive on the basis of available geological and engineering data. In
the absence of data on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of the
reservoir. Proved reserves are estimates of hydrocarbons to be recovered
from a given date forward. They may be revised as hydrocarbons are
produced and additional data become available. Proved natural gas
reserves are comprised of non-associated, associated, and dissolved gas.
An appropriate reduction in gas reserves has been made for the expected
removal of natural gas liquids, for lease and plant fuel, and the
exclusion of non-hydrocarbon gases if they occur in significant
quantities and are removed prior to sale. Reserves that can be produced
economically through the application of improved recovery techniques are
included in the proved classification when these qualifications are met:
(1) 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, and (2) it is
reasonably certain the project will proceed. Improved recovery includes
all methods for supplementing natural reservoir forces and energy, or
otherwise increasing ultimate recovery from a reservoir, including (1)
pressure maintenance, (2) cycling, and (3) secondary recovery in its
original sense. Improved recovery also includes the enhanced recovery
methods of thermal, chemical flooding, and the use of miscible and
immiscible displacement fluids. Estimates of proved reserves do not
include crude oil, natural gas, or natural gas liquids being held in
underground storage. Depending on the status of development, these
proved reserves are further subdivided into:
(i) "developed reserves" which are those proved reserves
reasonably expected to be recovered through existing wells with
existing equipment and operating methods, including (a) "developed
producing reserves" which are those proved developed reserves
reasonably expected to be produced from existing completion
intervals now open for production in existing wells, and (b)
"developed non-producing reserves" which are those proved
developed reserves which exist behind the casing of existing wells
which are reasonably expected to be produced through these wells
in the predictable future where the cost of making such
hydrocarbons available for production should be relatively small
compared to the cost of a new well; and
(ii) "undeveloped reserves" which are those proved reserves
reasonably expected to be recovered from new wells on undrilled
acreage, from existing wells where a relatively large expenditure
is required, and from acreage for which an application of fluid
injection or other improved recovery technique is contemplated
where the technique has been proved effective by actual tests in
the area in the same reservoir. Reserves from undrilled acreage
are limited to those drilling units offsetting productive units
that are reasonably certain of production when drilled. Proved
reserves for other undrilled units are included only where it can
be demonstrated with reasonable certainty that there is continuity
of production from the existing productive formation.
Because of the direct relationship between volumes of proved
undeveloped reserves and development plans, we include in the proved
undeveloped category only reserves assigned to undeveloped locations that we
have been assured will definitely be drilled and reserves assigned to the
undeveloped portions of secondary or tertiary projects which we have been
assured will definitely be developed.
The Company has interests in certain tracts which have
substantial additional hydrocarbon quantities which cannot be classified as
proved and consequently are not included herein. The Company has active
exploratory and development drilling programs which may result in the
reclassification of significant additional volumes to the proved category.
4
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 24, 1995
Page 3
In accordance with the requirements of FASB 69, our estimates
of future cash inflows, future costs, and future net cash inflows before income
tax as of December 31, 1994 from this report and as of December 31, 1993 from
our previous report are presented below.
As of December 31
($000)
----------------------------------------
1994 1993
---------------- ----------------
Future Cash Inflows $ 1,667,288 $ 2,206,438
Future Costs
Production $ 492,036 $ 508,017
Development 167,946 172,002
----------- ------------
Total Costs $ 659,982 $ 680,019
Future Net Cash Inflows
Before Income Tax $ 1,007,306 $ 1,526,419
Present Value at 10%
Before Income Tax $ 549,046 $ 778,386
The future cash inflows are gross revenues before any
deductions. The production costs were based on current data and include
production taxes, ad valorem taxes, and certain other items such as
transportation costs in addition to the operating costs directly applicable to
the individual leases or wells. The development costs were based on current
data and include certain dismantlement and abandonment costs net of salvage.
Table 3 presents a tabulation showing future cash inflow data by subsidiary.
The Company furnished us with gas prices in effect at December
31, 1994 and with its forecasts of future gas prices which take into account
SEC guidelines, current market prices, contract prices, and fixed and
determinable price escalations where applicable. In accordance with SEC
guidelines, the future gas prices used in this report make no allowances for
future gas price increases which may occur as a result of inflation nor do they
account for seasonal variations in gas prices which may cause future yearly
average gas prices to be somewhat lower than December gas prices.
5
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 24, 1995
Page 4
For gas sold under contract, the contract gas price including fixed and
determinable escalations exclusive of inflation adjustments, was used until the
contract expires and then was adjusted to the current market price for the area
and held at this adjusted price to depletion of the reserves.
The Company furnished us with liquid prices in effect at
December 31, 1994 and these prices were held constant to depletion of the
properties. In accordance with SEC guidelines, changes in liquid prices
subsequent to December 31, 1994 were not considered in this report.
Operating costs for the leases and wells in this report are
based on the operating expense reports of the Company and include only those
costs directly applicable to the leases or wells. When applicable, the
operating costs include a portion of general and administrative costs allocated
directly to the leases and wells under terms of operating agreements.
Development costs were furnished to us by the Company and are based on
authorizations for expenditure for the proposed work or actual costs for
similar projects. The current operating and development costs were held
constant throughout the life of the properties. The estimated net cost of
abandonment after salvage was considered for the Appalachia properties and
offshore properties where abandonment costs net of salvage are significant.
The estimates of net abandonment costs furnished by the Company were accepted
without independent verification. Abandonment costs for certain other onshore
properties were not considered because of their relative insignificance.
No deduction was made for indirect costs such as general
administration and overhead expenses, loan repayments, interest expenses, and
exploration and development prepayments. No attempt has been made to quantify
or otherwise account for any accumulated gas production imbalances that may
exist.
In our examination, we made a detailed investigation of
reserves and future production and income for those properties of the Company
which comprise 93.0 percent of the total future net income discounted at 10
percent. Due to the limitations of time and to their relative insignificance,
we accepted without examination and included herein the Company's estimates of
reserves and future production and income for those properties which comprise
the remaining 7.0 percent of total future net income discounted at 10 percent.
No consideration was given in this report to potential environmental
liabilities which may exist nor were any costs included for potential inability
to restore and clean up damages, if any, caused by past operating practices.
The Company informed us that it has furnished us all of the accounts, records,
geological and engineering data and reports and other data required for our
investigation The ownership interests, prices and other factual data were
accepted as represented. Moreover, to facilitate timely issuance of this
report, production data used in this report includes estimated production for
the last few months of 1994.
The reserves included in this report are estimates only and
should not be construed as being exact quantities. They may or may not be
actually recovered, and if recovered, the revenues therefrom and the actual
costs related thereto could be more or less than the estimated amounts.
Moreover, estimates of reserves may increase or decrease as a result of future
operations.
In general, we estimate that future gas production rates will
continue to be the same as the average rate for the latest available 12 months
of actual production until such time that the well or wells are incapable of
producing at this rate. The well or wells were then projected to decline at
their decreasing delivery capacity rate. Our general policy on estimates of
future gas production rates is adjusted when necessary to reflect actual gas
market conditions in specific cases. The future production rates from wells
now on production may be more or less than estimated because of changes in
market demand or allowables set by regulatory bodies. Wells or locations which
are not currently producing may start producing earlier or later than
anticipated in our estimates of their future production rates.
While it may reasonably be anticipated that the future prices
received for the sale of production and the operating costs and other costs
relating to such production may also increase or decrease from existing levels,
such changes were, in accordance with rules adopted by the SEC, omitted from
consideration in making this
6
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 24, 1995
Page 5
evaluation.
Neither we nor any of our employees have any interest in the
subject properties and neither the employment to make this study nor the
compensation is contingent on our estimates of reserves and future cash inflows
for the subject properties.
Very truly yours,
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
/s/ Harry J. Gaston, Jr.
----------------------------
Harry J. Gaston, Jr., P.E.
President
HJG/sw
7
TABLE 1
THE COLUMBIA GAS SYSTEM, INC.
Summary of Estimated Net Reserves in the United States
As of December 31, 1994
--------------------------------------------------------
Developed Undeveloped Total
--------------- --------------- ---------------
SALES GAS - MMCF
- ----------------
Columbia Natural Resources Inc. 417,323 128,639 545,962
Columbia Gas Development Corp. 126,023 11,783 137,806
---------- --------- -------------
Total Gas 543,346 140,422 683,768
OIL/CONDENSATE - BARRELS
- ------------------------
Columbia Natural Resources Inc. 1,504,085 0 1,504,085
Columbia Gas Development Corp. 8,473,471 743,503 9,216,974
--------- ------- ------------
Total Oil/Condensate 9,977,556 743,503 10,721,059
NATURAL GAS LIQUIDS
- -------------------
Columbia Natural Resources Inc. 0 0 0
Columbia Gas Development Corp. 1,526,694 7,172 1,533,866
--------- --------- -----------
Total Natural Gas Liquids 1,526,694 7,172 1,533,866
General: Volumes shown are net interest (i.e., working interest less
royalty interests).
8
Page 1 of
TABLE 2
COLUMBIA GAS SYSTEM, INC.
PROVED NET RESERVES DATA
AS OF DECEMBER 31, 1994
COLUMBIA NATURAL RESOURCES INC.(2)(3)
-------------------------------------------------------------
1994 1993 1992 1991
------------ ------------ ------------ ------------
Net Proved Liquid Reserves - Barrels(1)
- ------------------------------------
Developed and Undeveloped
- -------------------------
Beginning of Year 1,605,177 1,961,800 1,921,868 1,796,599
Revisions -108,420 -248,472 209,114 201,318
Extensions and Discoveries 291,238 106,681 48,253 119,899
Improved Recovery 0 0 0 0
Production -283,910 -214,832 -217,435 -195,948
Purchases of Reserves In-Place 0 0 0 0
Sales of Reserves In-Place 0 0 0 0
End of Year 1,504,085 1,605,177 1,961,800 1,921,868
Developed
---------
Beginning of Year 1,578,927 1,953,695 1,913,763 1,643,239
End of Year 1,504,085 1,578,927 1,953,695 1,913,763
Net Proved Gas Reserves - MMCF
- ------------------------------
Developed and Undeveloped
-------------------------
Beginning of Year 560,965 604,488 626,449 612,634
Revisions -35,982 -40,962 -15,591 15,106
Extensions and Discoveries 54,410 35,722 30,295 42,035
Improved Recovery 0 0 0 0
Production -32,959 -35,021 -35,150 -32,089
Purchases of Reserves In-Place 0 0 0 0
Sales of Reserves In-Place -472 -3,262 -1,515 -11,237
End of Year 545,962 560,965 604,488 626,449
Developed
---------
Beginning of Year 462,007 513,078 540,712 536,101
End of Year 417,323 462,007 513,078 540,712
INLAND GAS COMPANY (2)
-----------------------------------------------------
1994 1993 1992 1991
---------- ---------- ---------- ----------
Net Proved Liquid Reserves - Barrels(1)
- ------------------------------------
Developed and Undeveloped
- -------------------------
Beginning of Year 0 0 0 0
Revisions 0 0 1,913 2,140
Extensions and Discoveries 0 0 0 0
Improved Recovery 0 0 0
Production 0 0 -1,913 -2,140
Purchases of Reserves In-Place 0 0 0 0
Sales of Reserves In-Place 0 0 0 0
End of Year 0 0 0 0
Developed
---------
Beginning of Year 0 0 0 0
End of Year 0 0 0 0
Net Proved Gas Reserves - MMCF
- ------------------------------
Developed and Undeveloped
-------------------------
Beginning of Year 0 24,981 26,254 26,344
Revisions 0 -24,981 195 1,693
Extensions and Discoveries 0 0 0 0
Improved Recovery 0 0 0 0
Production 0 0 -1,356 -1,783
Purchases of Reserves In-Place 0 0 0 0
Sales of Reserves In-Place 0 0 -112 0
End of Year 0 0 24,981 26,254
Developed
---------
Beginning of Year 0 24,305 25,517 25,608
End of Year 0 0 24,305 25,517
9
Page 2 of
TABLE 2
COLUMBIA GAS SYSTEM, INC.
PROVED NET RESERVES DATA
AS OF DECEMBER 31, 1994
APPALACHIAN AREA
----------------------------------------------------------
1994 1993 1992 1991
---------- ---------- ---------- ----------
Net Proved Liquid Reserves - Barrels(1)
- ------------------------------------
Developed and Undeveloped
- -------------------------
Beginning of Year 1,605,177 1,961,800 1,921,868 1,796,599
Revisions -108,420 -248,472 211,027 203,458
Extensions and Discoveries 291,238 106,681 48,253 119,899
Improved Recovery 0 0 0 0
Production -283,910 -214,832 -219,348 -198,088
Purchases of Reserves In-Place 0 0 0 0
Sales of Reserves In-Place 0 0 0 0
End of Year 1,504,085 1,605,177 1,961,800 1,921,868
Developed
---------
Beginning of Year 1,578,927 1,953,695 1,913,763 1,643,239
End of Year 1,504,085 1,578,927 1,953,695 1,913,763
Net Proved Gas Reserves - MMCF
- ------------------------------
Developed and Undeveloped
-------------------------
Beginning of Year 560,965 629,469 652,703 638,978
Revisions -35,982 -65,943 -15,396 16,799
Extensions and Discoveries 54,410 35,722 30,295 42,035
Improved Recovery 0 0 0 0
Production -32,959 -35,021 -36,506 -33,872
Purchases of Reserves In-Place 0 0 0 0
Sales of Reserves In-Place -472 -3,262 -1,627 -11,237
End of Year 545,962 560,965 629,469 652,703
Developed
---------
Beginning of Year 462,007 537,383 566,229 561,709
End of Year 417,323 462,007 537,383 566,229
COLUMBIA GAS DEVELOPMENT CORPORATION (4)
----------------------------------------------------------------
1994 1993 1992 1991
----------- ----------- ----------- -----------
Net Proved Liquid Reserves - Barrels(1)
- ------------------------------------
Developed and Undeveloped
- -------------------------
Beginning of Year 11,187,195 12,688,494 13,646,268 12,944,718
Revisions 1,755,212 -340,701 -1,157,063 -1,057,271
Extensions and Discoveries 1,094,997 2,227,717 3,040,860 4,394,136
Improved Recovery 0 0 0 0
Production -3,324,154 -3,388,315 -2,841,571 -2,635,315
Purchases of Reserves In-Place 37,590 0 0 0
Sales of Reserves In-Place 0 0 0 0
End of Year 10,750,840 11,187,195 12,688,494 13,646,268
Developed
---------
Beginning of Year 9,213,848 11,189,415 11,423,798 9,567,172
End of Year 10,000,165 9,213,848 11,189,415 11,423,798
Net Proved Gas Reserves - MMCF
- ------------------------------
Developed and Undeveloped
-------------------------
Beginning of Year 136,081 150,021 155,445 173,519
Revisions 4,495 5,839 6,267 -2,572
Extensions and Discoveries 27,254 16,733 20,956 20,689
Improved Recovery 0 0 0 0
Production -33,622 -36,512 -32,647 -36,191
Purchases of Reserves In-Place 3,598 0 0 0
Sales of Reserves In-Place 0 0 0 0
End of Year 137,806 136,081 150,021 155,445
Developed
---------
Beginning of Year 111,713 126,983 131,495 168,360
End of Year 126,023 111,713 126,983 131,495
10
Page 3 of 3
TABLE 2
COLUMBIA GAS SYSTEM, INC.
PROVED NET RESERVES DATA
AS OF DECEMBER 31, 1994
THE COLUMBIA GAS SYSTEM, INC. (2)(4)
------------------------------------------------------------
1994 1993 1992 1991
---------- ---------- ---------- ----------
Net Proved Liquid Reserves - Barrels(1)
- ------------------------------------
Developed and Undeveloped
- -------------------------
Beginning of Year 12,792,372 14,650,294 15,568,136 14,741,317
Revisions 1,646,792 -589,173 -946,036 -853,813
Extensions and Discoveries 1,386,235 2,334,398 3,089,113 4,514,035
Improved Recovery 0 0 0 0
Production -3,608,064 -3,603,147 -3,060,919 -2,833,403
Purchases of Reserves In-Place 37,590 0 0 0
Sales of Reserves In-Place 0 0 0 0
End of Year 12,254,925 12,792,372 14,650,294 15,568,136
Developed
---------
Beginning of Year 10,792,775 13,143,110 13,337,561 11,210,411
End of Year 11,504,250 10,792,775 13,143,110 13,337,561
Net Proved Gas Reserves - MMCF
- ------------------------------
Developed and Undeveloped
-------------------------
Beginning of Year 697,046 779,490 808,148 812,497
Revisions -31,487 -60,104 -9,129 14,227
Extensions and Discoveries 81,664 52,455 51,251 62,724
Improved Recovery 0 0 0 0
Production -66,581 -71,533 -69,153 -70,063
Purchases of Reserves In-Place 3,598 0 0 0
Sales of Reserves In-Place -472 -3,262 -1,627 -11,237
End of Year 683,768 697,046 779,490 808,148
Developed
---------
Beginning of Year 573,720 664,366 697,724 730,069
End of Year 543,346 573,720 664,366 697,724
(1) Liquid reserves shown above are comprised of crude oil, condensate
and natural gas liquids.
(2) Inland Gas Company reserves combined with Columbia Natural Resources
in 1993.
(3) Columbia Gas Transmission Company reserves combined with Columbia
Natural Resources in 1990.
(4) Includes some Company supplied estimates. See discussion.
11
TABLE 3
COLUMBIA GAS SYSTEM, INC.
PRESENT VALUE OF FUTURE NET REVENUE FROM PROVED RESERVES
FROM UNITED STATES RESERVES
AS OF DECEMBER 31, 1994
($000)
COLUMBIA NATURAL RESOURCES INC. (a)
-------------------------------------------
Developed Undeveloped Total
--------- ----------- ----------
Revenues from Production 984,120 290,635 1,274,755
Costs of Development (b) 16,172 108,323 124,495
Costs of Production 338,260 42,613 380,873
Future Net Revenue 629,688 139,699 769,387
Present Value Discounted @ 10% 326,491 26,486 352,977
Present Value Attributable to:
(1) Reserves added Prior to 1994 329,605
(2) Proved Reserves Added During 1994 23,372
(3) Application of Improved Recovery Techniques During 1994 0
(4) Purchases of Reserves In-Place During 1994 0
COLUMBIA GAS
DEVELOPMENT CORPORATION (c)
----------------------------------------
Developed Undeveloped Total
--------- ----------- ----------
Revenues from Production 359,191 33,342 392,533
Costs of Development (b) 34,922 8,529 43,451
Costs of Production 108,204 2,959 111,163
Future Net Revenue 216,065 21,854 237,919
Present Value Discounted @ 10% 180,438 15,631 196,069
Present Value Attributable to:
(1) Reserves added Prior to 1994 150,184
(2) Proved Reserves Added During 1994 44,882
(3) Application of Improved Recovery Techniques During 1994 0
(4) Purchases of Reserves In-Place During 1994 1,003
THE COLUMBIA GAS SYSTEM, INC. (c)
---------------------------------------------
Developed Undeveloped Total
--------- ----------- ----------
Revenues from Production 1,343,311 323,977 1,667,288
Costs of Development (b) 51,094 116,852 167,946
Costs of Production 446,464 45,572 492,036
Future Net Revenue 845,753 161,553 1,007,306
Present Value Discounted @ 10% 506,929 42,117 549,046
Present Value Attributable to:
(1) Reserves added Prior to 1994 479,789
(2) Proved Reserves Added During 1994 68,254
(3) Application of Improved Recovery Techniques During 1994 0
(4) Purchases of Reserves In-Place During 1994 1,003
(a) Reflects merging of reserves from Columbia Gas Transportation and Inland
Gas Company with those of Columbia Natural Resources.
(b) Includes future development and abandonment costs.
(c) Includes some company supplied estimates. See discussion.