Item 7(c)
Exhibit (99)
Reserve Report from
Netherland, Sewell & Associates, Inc.
December 8, 1997
Mr. William E. Gross
Denbury Management, Inc.
17304 Preston Road, Suite 200
Dallas, Texas 75252
Dear Mr. Gross:
In accordance with your request, we have estimated the proved reserves, as
of January 1, 1998, to the combined interests of Denbury Management, Inc. (DMI)
and Chevron U.S.A. Inc. (CUSA) in certain oil and gas properties located in the
East Heidelberg and West Heidelberg Fields, Jasper County, Mississippi. These
properties include those acquired from Lake Ronel Oil Company, Lawco Exploration
Inc., and Deepwell Co. during 1997 and those currently being acquired from CUSA.
This report has been prepared using constant prices and costs as set forth in
this letter. Economics have been considered only to the extent necessary to
establish the profitability of certain operations and to determine the economic
limits of the wells.
We estimate the net reserves to the combined interests of DMI and CUSA in
the East Heidelberg and West Heidelberg Fields, as of January 1, 1998, to be:
Net Reserves
----------------------------
Oil Gas
Category (Barrels) (MCF)
- ----------------- ----------- ------------
Proved Developed
Producing 9,824,707 1,057,655
Non-Producing 4,246,437 1,496,865
Proved 16,487,090 0
Undeveloped
----------- ------------
Total Proved 30,558,234 2,554,520
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.
The estimated reserves shown in this report are for proved developed
producing, proved developed non-producing, and proved undeveloped reserves. This
report does not include any probable or possible reserves which may exist for
these 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.
Economic parameters have been considered, for the purposes of this report,
only to the extent necessary to establish the profitability of certain
operations and to determine the economic limits of the wells. As requested, oil
prices used in this report are based on a NYMEX Cushing West Texas Intermediate
price of $19.75 per barrel, adjusted by lease for gravity, transportation fees,
and regional posted price differentials. The gas price used in this report is
$2.50 per MCF. Oil and gas prices are held constant throughout the life of the
properties.
Lease and well operating costs are based on operating expense records of
DMI and CUSA. 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 DMI and CUSA are not included. Lease and well operating
costs are held constant throughout the life of the properties. Capital costs are
included as required for workovers, new development wells, and production
equipment.
We have made no investigation of potential gas volume imbalances which may
have resulted from overdelivery or underdelivery to the DMI and CUSA interests.
Therefore, our estimates of reserves do not include adjustments for the
settlement of any such imbalances; our projections are based on DMI and CUSA
receiving their 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
Denbury Management, Inc., Chevron U.S.A. Inc., 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/ Fred Sewell
--------------------
Fred Sewell
DMA:MMD