1
(RYDER SCOTT COMPANY LETTERHEAD)
EXHIBIT 28
February 3, 1995
Pogo Producing Company
Post Office Box 2504
Houston, Texas 77252-2504
Gentlemen:
At your request we have prepared an estimate of the reserves, future
production, and income attributable to certain leasehold and royalty interests
of Pogo Producing Company and its wholly owned subsidiaries (the Company) as of
December 31, 1994. 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. 1 together with a tabulation of the components
of the differences in the estimates as of such dates. The Company's reserves
in the United States are located in the states of Colorado, Louisiana, New
Mexico, Oklahoma, Texas, and in state and federal waters offshore Louisiana and
Texas. The Company's foreign reserves are located offshore Thailand.
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 from the estimated
quantities presented in this report. Our estimates of the proved net reserves
attributable to the interests of the Company as of December 31, 1994 are shown
below:
Proved Net Reserves
As of December 31, 1994
------------------------------------
Liquid, Barrels Gas, MMCF
--------------- ---------
Developed and Undeveloped
United States 26,187,240 186,151
Foreign 7,674,372 56,739
----------- --------
Total Worldwide 33,861,612 242,890
Developed
United States 24,669,755 178,518
Foreign 0 0
----------- --------
Total Worldwide 24,669,755 178,518
The "Liquid" reserves shown above are comprised of crude oil,
condensate, and natural gas liquids. Natural gas liquids comprise 17 percent
of the Company's developed liquid reserves and 13 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.
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Pogo Producing Company
February 3, 1995
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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:
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
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Pogo Producing Company
February 3, 1995
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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.
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
-----------------------------------------
1994 1993
------------- -------------
Future Cash Inflows 985,887,955 $895,060,044
Future Costs
Production $253,140,202 $211,741,925
Development 180,838,861 133,257,042
------------- -------------
Total Costs $433,979,063 $344,998,967
Future Net Cash Inflows
Before Income Tax $551,908,892 $550,061,077
Present Value at 10%
Before Income Tax $382,979,729 $403,840,199
Our estimates as of December 31, 1994 and 1993 of future cash
inflows, future costs, future net cash inflows before income tax, and present
value at 10 percent before income tax are shown individually for total
worldwide, total United States (onshore and offshore), and foreign areas in
Table No. 2 which is attached.
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 dismantlement and abandonment costs net of salvage for
properties where such costs are relatively significant.
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
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Pogo Producing Company
February 3, 1995
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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. 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.
The estimates of future net revenue from the Company's foreign
property are based on existing law. Operating costs for the leases and wells
in this report were 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. For properties located
onshore, this study did not consider the salvage value of the lease equipment
or the abandonment cost since both are relatively insignificant and tend to
offset each other. The estimated net cost of abandonment after salvage was
included for offshore properties where abandonment costs net of salvage are
significant. The estimates of the offshore net abandonment costs furnished by
the Company were accepted without independent verification. No deduction was
made for indirect costs such as general administration and overhead expenses,
loan repayments, interest expenses, and exploration and development
prepayments. The Company supplied data on accumulated gas production
imbalances which were taken into account in our estimates of future production
and income.
The estimates of reserves presented herein are based upon a
detailed study of the properties in which the Company owns an interest;
however, we have not made any field examination of the properties. No
consideration was given in this report to potential environmental liabilities
which may exist nor were any costs included for potential liability to restore
and clean up damages, if any, caused by past operating practices. The Company
has informed us that they have furnished us all of the accounts, records,
geological and engineering data and reports, and other data required for this
investigation. The ownership interests, prices, and other factual data
furnished by the Company were accepted without independent verification. The
estimates presented in this report are based on data available through December
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.
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Pogo Producing Company
February 3, 1995
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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 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/ FRED P. RICHOUX
Fred P. Richoux, P.E.
Group Vice President
FPR/sw
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TABLE NO. 1
POGO PRODUCING COMPANY
Proved Net Resere Data
United States Foreign
Total Worldwide Total Onshore and Offshore Thailand Offshore
---------------------------------- ---------------------------------- --------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
Net Proved Liquid(1)
Reserves, Barrels
- ------------------
Developed and Undeveloped
Beginning of Year 28,268,441 22,555,788 18,818,091 22,843,628 19,978,881 18,818,091 5,424,813 2,576,907 0
Revisions 1,286,984 342,022 1,721,385 1,286,984 342,022 1,721,385 0 0 0
Extensions and
Discoveries 6,565,442 9,764,408 5,486,273 4,315,883 6,916,502 2,909,366 2,249,559 2,847,906 2,576,907
Improved Recovery 0 0 0 0 0 0 0 0 0
Estimated Production -4,945,677 -4,219,873 -3,611,105 -4,945,677 -4,219,873 -3,611,105 0 0 0
Purchase of
Reserves In-Place 2,686,919 182,610 335,750 2,686,919 182,610 335,750 0 0 0
Sales of Reserves
In-Place -497 -356,514 -194,606 -497 -356,514 -194,606 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
End of Year 33,861,612 28,268,441 22,555,788 26,187,240 22,843,628 19,978,881 7,674,372 5,424,813 2,576,907
Developed
Beginning of Year 20,976,194 18,798,149 17,549,830 20,976,194 18,798,149 17,549,830 0 0 0
End of Year 24,669,755 20,976,194 18,798,149 24,669,755 20,976,194 18,798,149 0 0 0
Net Proved Gas Reserves,
Millions of Cubic Feet
- ------------------------
Developed and Undeveloped
Beginning of Year 232,866 207,068 202,735 199,392 196,400 202,735 33,474 10,668 0
Revisions -2,558 1,148 20,284 -2,558 1,148 20,284 0 0 0
Extensions and
Discoveries 49,517 55,626 19,126 26,252 32,820 8,458 23,265 22,806 10,668
Improved Recovery 0 0 0 0 0 0 0 0 0
Estimated Production -52,618 -32,319 -40,581 -52,618 -32,319 -40,581 0 0 0
Purchase of Reserves
In-Place 15,792 13,192 10,237 15,792 13,192 10,237 0 0 0
Sales of Reserves
In-Place -109 -11,849 -4,733 -109 -11,849 -4,733 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
End of Year 242,890 232,866 207,068 186,151 199,392 196,400 56,739 33,474 10,668
Developed
Beginning of Year 183,139 175,523 188,090 183,139 175,523 188,090 0 0 0
End of Year 178,518 183,139 175,523 178,518 183,139 175,523 0 0 0
_______________________________
(1) Liquid reserves shown above are comprised of crude oil, condensate
and natural gas liquids.
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TABLE NO. 2
POGO PRODUCING COMPANY
Cash Inflow and Cost Data (U.S. Dollars)
United States
Total Worldwide Onshore and Offshore Thailand Offshore
As of December 31 As of December 31 As of December 31
---------------------------- ---------------------------- ----------------------------
1994 1993 1994 1993 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
Future Cash Inflows(1) $985,887,955 $895,060,044 $720,085,779 $744,200,701 $265,802,176 $150,859,343
Future Costs
Production(2) $253,140,202 $211,741,925 $192,833,675 $158,934,102 $ 60,306,527 $ 52,807,823
Development(3) 180,838,861 133,257,042 86,683,951 79,734,742 94,154,910 53,522,300
------------ ------------ ------------ ------------ ------------ ------------
Total Costs $433,979,063 $344,998,967 $279,517,626 $238,668,844 $154,461,437 $106,330,123
Future Cash Inflows
Before Income Tax $551,908,892 $550,061,077 $440,568,153 $505,531,857 $111,340,739 $ 44,529,220
Present Value @ 10%
Before Income Tax $382,979,729 $403,840,199 $330,867,582 $386,673,722 $ 52,112,147 $ 17,166,477
_______________________________
(1) Gross revenues before any deductions.
(2) Includes production taxes in the U.S.A., SRB taxes in Thailand, ad valorem
taxes and certain other items such as transportation charges.
(3) Includes future abandonment costs net of salvage for offshore properties
where such costs are relatively significant.