EXHIBIT 99
February 5, 1997
Patina Oil & Gas Corporation
1625 Broadway, Suite 2000
Denver, Colorado 80202
Gentlemen:
In accordance with your request, we have estimated the proved reserves and
future revenue, as of December 31, 1996, to the Patina Oil & Gas Corporation
(Patina) interest in certain oil and gas properties located in Colorado. 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 Patina. 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 Patina interest, as
of December 31, 1996, to be:
Net Reserves Future Net Reserves
------------------------ -------------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- ---------------- ---------- ----------- -------------- ------------
Proved Developed
Producing 12,971,418 206,872,544 $ 824,044,600 $500,440,700
Non-Producing 2,827,690 35,904,440 156,219,400 81,966,600
Proved Undeveloped 6,676,152 53,882,147 188,602,900 66,389,200
---------- ----------- -------------- ------------
Total Proved 22,475,260 296,659,131 $1,168,866,900 $648,796,500
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, this report includes summary projections
of reserves and revenue for each 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 Patina 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. 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.
Also, our estimates do not include any salvage value for the lease and well
equipment nor the cost of abandoning the properties.
Oil prices used in this report are based on a December 31, 1996 West Texas
Intermediate posted price of $24.25 per barrel, adjusted by lease for gravity,
transportation fees, and regional posted price differentials. Gas prices used
in this report are the average December 1996 prices for each pipeline. Oil and
gas prices are held constant in accordance with SEC guidelines.
Lease and well operating costs are based on operating expense records of
Patina. 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
Patina 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 Patina
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 Patina 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
judgements.
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
Patina Oil & Gas 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