1
EXHIBIT 99.(b)(1)
August 21, 1996
Seaboard Oil Company
3100 North "A" Street
Building "B", Suite 200
Midland, Texas 79705
Gentlemen:
In accordance with your request, we have estimated the extent and value of
certain domestic proved crude oil, condensate, and gas reserves owned by
Seaboard Oil Company (the "Company") as of March 31, 1996. The properties to
which proved reserves are attributable are located in the states of Arkansas,
Colorado, Louisiana, North Dakota, New Mexico, Oklahoma, Texas and Wyoming.
The estimated reserves are based on a detailed study of certain properties
owned by the "Company". During this study, we consulted freely with the
officers and employees of the "Company" and were given access to such records,
geological and engineering reports, and other data as were desired for
examination. In preparation of this report, we have relied without independent
verification upon information furnished by the "Company" with respect to
property interests owned by it, production from such properties, current costs
of operation, current prices for production, agreements relating to current and
future operations and various other information and data which were accepted as
represented. It was not considered necessary to make a field examination of
the physical condition and operation of the properties in which the "Company"
owns an interest.
We estimate the net proved reserves, future net revenue, and the present value
of future net revenue from the properties of the "Company" as of March 31, 1996
to be as follows:
Present Value
Classification Oil and Future Net Discounted
of Reserves Condensate Gas Revenue at 10 Percent
-------------- ---------- ------- ---------- -------------
(MBBL) (MMCF) (M$) (M$)
Proved Developed
Producing 1,947 1,904 25,105 17,020
2
The following table sets forth the changes in total proved reserves owned by
the "Company" as of March 31, 1996:
Net Liquid Net Gas
(BBL) (MCF)
---------- -------
Total Proved Reserves:
Developed and Undeveloped
Beginning of Period, March 31, 1995 2,316,240 2,181,778
Revisions of Previous Estimates (86,329) (13,427)
--------- ---------
Beginning of Year, as Revised 2,229,911 2,168,351
Improved Recovery
Purchases of Minerals-in-Place
and Extensions 28,148 53,065
Production (311,004) (330,951)
Sales of Minerals-in-Place 251 14,154
--------- ---------
End of Period, March 31, 1996 1,947,306 1,904,619
========= =========
Proved Developed Reserves:
Beginning of Period, March 31, 1995 2,003,768 2,181,778
End of Period, March 31, 1996 1,947,306 1,904,619
3
Seaboard Oil Company
August 21, 1996
Page 3
Using a ten percent discount rate, the present value of the estimated future
net revenue from proved oil and gas reserves owned by the "Company" as of March
31, 1996 is shown as follows:
Net Value, $
Discounted at 10%
-----------------
Proved Developed and Undeveloped Reserves:
Added in Previous Years 16,980,657
New Discoveries and
Purchases of Minerals-in-Place 39,413
----------
Total as of March 31, 1996 17,020,070
==========
Proved Developed Reserves: 17,020,070
==========
The reserves evaluated in this report are classified as proved. Reserves for
the producing properties were determined by extrapolation of the production
decline trends, where applicable, analogy with similar offset wells, by
volumetric calculations using basic reservoir parameters such as porosity,
water saturation, net pay thickness, and estimated areal extent of the
reservoir, or by material balance calculations.
This study was performed using industry-accepted principles of engineering
evaluation that are predicated on established scientific concepts. The
application of such principles involves extensive judgments and is subject to
changes in existing technical knowledge, economic conditions and statutory or
regulatory provisions. Reserve evaluations are imprecise due to inherent
uncertainties and limitations in the data base. Joe C. Neal & Associates
reserves the right to alter the calculation of reserves discussed in this
report if corrections to these data are subsequently required.
The value estimated in this report is based on the assumptions that the
properties are not negatively affected by the existence of hazardous substances
or detrimental environmental conditions. We are experts in the identification
of hazardous substances but were not asked to make that determination. It is
possible that tests and inspections conducted by a qualified hazardous
substance and environmental expert could reveal the existence of hazardous
material and environmental conditions on or around the properties that would
negatively affect the properties' value.
4
Seaboard Oil Company
August 21, 1996
Page 4
Property identification, expense and revenue interests, actual product prices,
and operating expenses were provided by the "Company". These data were not
verified by inspection of internal records and files, nor was a physical
inspection made of the properties. Information regarding prices and the
particular pricing categories under current governmental regulations was
supplied by the "Company".
Net oil and gas reserves are estimated quantities of crude oil, natural gas,
and natural gas liquids attributed to the revenue interests of the "Company"
after deduction of royalty and/or overriding royalty interests. Net income to
the revenue interests of the "Company" is the future net revenue after
deduction of state and county taxes, operating expenses, and investments, if
applicable. The resulting net income is before federal income tax and does not
consider any encumbrances against the properties, if such exist. Minor
variations in composite column totals result from computer rounding.
Values of the estimated net proved reserves are expressed in terms of future
net revenue and present value of future net revenue. Future net revenue are
calculated by deducting estimated operating expenses, capital costs, and
severance and ad valorem taxes from the future gross revenue.
Present value of future net revenue is calculated by discounting the future net
revenue at the rate of ten percent per annum compounded monthly over the
expected period of realization. The present value set forth in this report
does not necessarily represent the fair market value of the evaluated
interests.
A summary projection of the estimated future net revenue and present value of
future net revenue as of March 31, 1996 is as follows:
Proved Developed
----------------
Future Net Discounted
Year Revenue at 10%
---- ---------- ----------
($) ($)
1996 4,586,330 4,364,509
1997 3,770,459 3,246,713
1998 3,114,526 2,426,698
Remaining 13,633,915 6,982,150
---------- ----------
Total 25,105,230 17,020,070
========== ==========
Current oil and gas prices were employed, with prices changed only to the
extent that
5
Seaboard Oil Company
August 21, 1996
Page 5
the price changes are considered, under the Securities and Exchange
Commission's rules, to be fixed and determinable. Oil volumes shown herein are
expressed in barrels which are equivalent to 42 United States gallons. Gas
volumes are expressed at standard conditions of 60 degrees Fahrenheit and at
the standard pressure base of the respective area in which the reserves are
located.
Operating expenses were held constant for the life of the properties, except
for the Robertson North Clearfork and Quito West Units. The operating costs
were de-escalated for the loss of downdip wells as the units mature and "water
out"these wells. Severance and ad valorem taxes were deducted in the lease
reserves and economics projections at the standard state rates.
This report is solely for the information of and assistance to the "Company"
for their use in Securities and Exchange Commission filings. It is not to be
used, circulated, quoted or otherwise referred to for any other purpose without
the express written consent of the undersigned except as required by law. Data
utilized in this report will be maintained in our files and are available for
your use. It has been our privilege to serve you by preparing this evaluation.
Yours very truly,
/s/ JOE C. NEAL & ASSOCIATES
JCN:bm
Reference: 96004
6
CONSENT OF INDEPENDENT ENGINEERS
As independent engineer consultants, we hereby consent to the use of our
summary report and data extracted therefrom (and all references to our Firm)
included in or made a part of this Rule 13E-3 Transaction Statement and Proxy
Statement for the Company's 1996 Annual Meeting.
/s/ Joe C. Neal & Associates
----------------------------
JOE C. NEAL & ASSOCIATES
Dated: August 21, 1996