Exhibit 23(d)
February 26, 1999
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 and
probable reserves and future revenue, as of December 31, 1998, to the Denbury
Management, Inc. (DMI) interest in certain oil and gas properties located in
Louisiana, Mississippi, Ohio, and Texas as listed in the accompanying
tabulations. This report has been prepared using constant prices and costs as
set forth in this letter. For the proved reserves, this report conforms to the
guidelines of the Securities and Exchange Commission (SEC). However, inasmuch as
the SEC does not recognize probable reserves, the sections of this report
dealing with such reserves should not be used in filings with the SEC.
As presented in the accompanying summary projections, Tables I through
V, we estimate the net reserves and future net revenue to the DMI interest, as
of December 31, 1998, to be:
Net Reserves Future Net Revenue
---------------------------------- -----------------------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- ------------------------- --------------- --------------- ------------------ -----------------
Proved Developed
Producing 10,961,908 19,505,074 $ 78,347,000 $ 64,250,600
Non-Producing 9,395,088 25,489,761 75,771,900 42,660,300
Proved Undeveloped 7,892,514 3,807,871 26,621,000 8,108,400
--------------- --------------- ------------------ -----------------
Total Proved 28,249,510 48,802,706 $ 180,739,900 $ 115,019,300
=============== =============== ================== =================
Probable (1) 23,095,457 62,244,431 177,599,500 82,690,500
=============== =============== ================== =================
<FN>
(1) These reserves are not risk weighted.
</FN>
The oil reserves shown include crude oil, condensate, and gas plant
liquids. Oil volumes are expressed in barrels which are equivalent to 42 United
States gallons. Gas volumes are
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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 state by reserve category along
with one-line summaries of reserves, economics, and basic data by lease.
Supplemental data summaries are also included by reserve category for each
state. 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, proved undeveloped,
and probable reserves. No study was made to determine whether possible reserves
might be established 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 DMI 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 either a December 31, 1998
NYMEX West Texas Intermediate spot price of $12.05 per barrel, adjusted by lease
for gravity, transportation fees, and regional price differentials, or the
contract price. For the Apollo, Heidelberg, Sandersville, and South Thompson
Creek Fields, oil prices are held constant at current contract floor prices
until contract expiration. These prices are then reduced to the December 31,
1998 NYMEX West Texas Intermediate spot price of $12.05 per barrel, adjusted by
lease for gravity, transportation fees, and regional price differentials, and
held constant thereafter. All other oil prices are held constant in accordance
with SEC guidelines. The natural gas liquids price used for Eucutta Field,
Mississippi, is $6.50 per barrel and is held constant in accordance with SEC
guidelines.
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Gas prices used in this report are based on a December 1998 NYMEX Henry
Hub natural gas settlement price of $2.15 per MMBTU, adjusted by lease for
transportation fees, BTU content, and regional price differentials. These prices
are held constant in accordance with SEC guidelines.
Lease and well operating costs are based on operating expense records
of DMI. 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 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 DMI
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 DMI 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. A substantial portion of these reserves are for
behind pipe zones, undeveloped locations, and producing wells that lack
sufficient production history upon which performance-related estimates of
reserves can be based. Therefore, these reserves are based on estimates of
reservoir volumes and recovery efficiencies along with analogies to similar
production. As such reserve estimates are usually subject to greater revision
than those based on substantial production and pressure data, it may be
necessary to revise these estimates up or down in the future as additional
performance data become available. 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
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data used in our estimates were obtained from Denbury Management, Inc.; other
interest owners; various operators of the properties; 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,
DMA:EIB
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