EXHIBIT 99.5
R E D
RALPH E. DAVIS
ASSOCIATES, INC.
April 2, 2014
Three Forks, Inc.
555 Eldorado Blvd, Suite 100
Broomfield, CO 80021
Attention: Mr. Chuck Pollard
President
Re: End of Year Reserve Report
Louisiana, Oklahoma and Texas Properties
SEC Price Deck with Abandonment Costs
As of December 31, 2013
Mr. Pollard:
At your request the firm of Ralph E. Davis Associates, Inc. ("Davis") of
Houston, Texas USA, has prepared an estimate of oil and natural gas reserves on
specific leasehold interests in which Three Forks, Inc. ("TFI") holds interests
in. The purpose of this report is to present a summary of our estimate of the
proved developed producing, proved developed non-producing and proved
undeveloped reserves that are anticipated to be produced from those leaseholds
and remaining as of December 31, 2013. The subject properties are located in the
states of Louisiana, Oklahoma and Texas and meet the criteria of proved reserves
as outlined in the following reserve criteria.
The reserves associated with this review have been classified in accordance with
the definitions of the Securities and Exchange Commission as found in Part
210--Form and Content of and Requirements for Financial Statements, Securities
Act of 1933, Securities Exchange Act of 1934, Public Utility Holding Company Act
of 1935, Investment Company Act of 1940, Investment Advisers Act of 1940, and
Energy Policy and Conservation Act of 1975, under Rules of General Application
ss. 210.4-10 Financial accounting and reporting for oil and gas producing
activities pursuant to the Federal securities laws and the Energy Policy and
Conservation Act of 1975. A summation of these definitions is included as a
portion of this letter.
We have also estimated the future net revenue and discounted present value
associated with these reserves as of December 31, 2013, utilizing a scenario of
non-escalated product prices as well as non-escalated costs of operations, i.e.,
prices and costs were not escalated above current values as detailed later in
this report. The present value is presented for your information and should not
be construed as an estimate of the fair market value.
The results of our study related to our estimate of the Total Proved Reserves
attributable to TFI and remaining to be produced as of December 31, 2013 are as
follows:
Three Forks, Inc. Reserve Report April 2, 2014
SEC Price Deck With Abandonment Costs Page 2 of 5
As of December 31, 2013
ESTIMATED PROVED RESERVES
NET TO THREE FORKS, INC.
AS OF DECEMBER 31, 2013
NON-ESCALATED SEC PRICE DESK
Net Oil, Net Gas, Net Exp., Net Invest., FNR, PV-10,
Reserves Category MBL MMCF M$ M$ M$ M$
------------------ -------- -------- --------- ------------ --------- ----------
PROVED
Dev. Producing 242.9 187.0 $ 8,041.5 $ 725.1 $15,245.0 $ 9,501.9
Dev. Non-Producing 193.5 0.0 $ 4,157.8 $1,291.8 $13,636.2 $ 8,383.1
Undeveloped 44.4 167.3 $ 606.4 $ 913.7 $ 2,954.2 $ 1,381.6
Shut-In 0.0 0.0 $ 0.0 $ 211.8 $ -211.8 $ -17.3
------------------ -------- -------- --------- ------------ --------- ----------
TOTAL PROVED 480.7 354.3 $12,805.7 $3,142.4 $31,623.7 $19,249.3
NOTE: THERE MAY BE DIFFERENCES IN THE ADDITION AS A RESULT OF COMPUTER PROGRAM
ROUNDING OF NUMBERS
Gas volumes are expressed in million cubic feet (MMCF) at the official
temperature and pressure bases where the gas reserves are located.
A summary presentation by reserve category at the scheduled price scenario is
included behind the economic summary analysis tab. An additional presentation by
reserve category by producing area is also included in the presentation of the
report.
DISCUSSION
The scope of this study was to review basic information and supporting data and
prepare estimates of the proved reserves attributable to the interests of TFI.
Reserve estimates were prepared by Davis using acceptable evaluation principles
for each source and were based in large part on the basic information supplied
by TFI.
The quantities presented herein are estimated reserves of oil and natural gas
that geologic and engineering data demonstrate can be recovered from known
reservoirs under current economic conditions with reasonable certainty.
This evaluation has been prepared in accordance with the "Standards Pertaining
to the Estimating and Auditing of Oil and Gas Reserves Information" as
proclaimed by the Society of Petroleum Engineers", the SPE Standards.
The properties evaluated are to be operated Five Jabs for all wells in
Louisiana, by Blue Quail for the wells in Oklahoma, by TFI for the wells in
Archer County Regular field in Texas and by Five Jab for the remaining wells in
Texas. All proved developed producing as well as non-producing properties were
reviewed for this evaluation. All data was made available by TFI. Data provided
includes well logs, sub-surface maps, timing of future development, drilling and
investments.
Texas Registered Engineering Firm F-1529
Three Forks, Inc. Reserve Report April 2, 2014
SEC Price Deck With Abandonment Costs Page 3 of 5
As of December 31, 2013
DATA SOURCE
Basic well and field data used in the preparation of this report were furnished
by TFI or were obtained from public sources. Records as they pertain to factual
matters such as acreage controlled, the number and depths of wells, reservoir
pressure and/or production history, the existence of contractual obligations to
others and similar matters were accepted as presented.
Well logs, ownership interest, revenues received from the sale of products and
operating costs were furnished by TFI. No physical inspection of the properties
was made nor any well tests conducted.
Operating cost data were provided by TFI and were utilized to estimate the
direct cost of operation for each property or producing unit. Certain historical
costs of operation are charged against a producing unit or group of wells in
addition to those individual well costs that may be scheduled for an area.
RESERVE ESTIMATES
The reserves presented in this report have been estimated using engineering and
geological methods widely accepted in the industry. For the proved developed
producing, the estimates were made when considered to be definitive, using
performance methods that utilize extrapolations of various historical data.
The accuracy of reserve estimates is dependent upon the quality of available
data and upon the independent geological and engineering interpretation of that
data. The quantities presented herein are estimated reserves of oil that
geologic and engineering data demonstrate can be recovered from known reservoirs
under current economic conditions with reasonable certainty. The reserves are
calculated using acceptable methods and procedures and are believed to be
reasonable; however, future reservoir performance may justify revision of these
estimates.
PRODUCING RATES
For the purpose of this report, estimated reserves are scheduled for recovery
primarily on the basis of actual producing rates or appropriate well test
information. They were prepared giving consideration to engineering and
geological data such as reservoir pressure, anticipated producing mechanisms,
the number and types of completions.
These and other future rates may be subject to regulation by various agencies,
changes in market demand or other factors; consequently, reserves recovered and
the actual rates of recovery may vary from the estimates included herein.
Scheduled dates of future well completions may vary from that provided by TFI
due to changes in market demand or the availability of materials and/or capital;
however, the timing of the wells and their estimated rates of production are
reasonable and consistent with established performance to date.
Texas Registered Engineering Firm F-1529
Three Forks, Inc. Reserve Report April 2, 2014
SEC Price Deck With Abandonment Costs Page 4 of 5
As of December 31, 2013
PRICING PROVISIONS
The unit price used throughout this report for crude oil and natural gas is
based upon an SEC price scenario of a fixed future price of $96.78 per BO and
$3.67 per MMBtu. This price was then adjusted, on a per field bases, to reflect
received price variations due to quality, transportation costs, and other
factors that are field specific and have an effect on the received price. This
adjustment was determined by using the Cushing WTI posted prices for oil or
Henry Hub posting for gas for the first trading day of each month from January
2013 through December 2013 and averaged for the year. This price was compared to
the average price received in 2013 for each respective field and then the
difference was applied as the adjustment to the base oil and gas price.
OIL - The unit price used throughout this report for oil reserves is based upon
a price of $96.78 per bbl and then adjusted by the field differential, if any,
which is represented below in Table 1. This price was held constant throughout
the life of the properties. Prices for oil reserves scheduled for initial
production at some future date were estimated using current prices on the same
properties.
NATURAL GAS - The unit price used throughout this report for gas reserves is
based upon a price of $3.67 per MMBtu and then adjusted by the field
differential, if any, as shown in Table 1 below. This price was held constant
throughout the life of the properties. Prices for gas reserves scheduled for
initial production at some future date were estimated using current prices on
the same properties.
TABLE 1
----------------------- --------------------------- ----------------------------
FIELD OIL PRICE ADJUST. - $/BBL GAS PRICE ADJUST. - $/MMBTU
----------------------- --------------------------- ----------------------------
ARCHER CO. REGULAR - -
----------------------- --------------------------- ----------------------------
CHARENTON + 10.13 -
----------------------- --------------------------- ----------------------------
CONROE + 5.93 + 1.09
----------------------- --------------------------- ----------------------------
E. BASILE + 7.35 -
----------------------- --------------------------- ----------------------------
FENRIS + 3.92 -
----------------------- --------------------------- ----------------------------
JASPER + 8.36 -
----------------------- --------------------------- ----------------------------
JOE'S LAKE WEST - -
----------------------- --------------------------- ----------------------------
N. LAKE CARL BLACKWELL - -
----------------------- --------------------------- ----------------------------
JASPER - -
----------------------- --------------------------- ----------------------------
JOE'S LAKE WEST - -
----------------------- --------------------------- ----------------------------
PINK PROSPECT - -
----------------------- --------------------------- ----------------------------
SPORTSMAN LAKE - -
----------------------- --------------------------- ----------------------------
FUTURE NET INCOME
Future net income is based upon gross income from future production, less direct
operating expenses, estimated future well abandonment costs and applicable state
and local taxes. Estimated future capital for development was also deducted from
gross income at the time it will be expended. No allowance was made for
depletion, depreciation, income taxes or administrative expense.
Texas Registered Engineering Firm F-1529
Three Forks, Inc. Reserve Report April 2, 2014
SEC Price Deck With Abandonment Costs Page 5 of 5
As of December 31, 2013
Direct lease operating expense includes estimated value for future operations
were provided by TFI and are accepted as reasonable. Lease operating expenses
and/or capital costs for drilling and/or major workover expense were held flat
throughout the producing life of the properties.
Future net income has been discounted for present worth at values ranging from 0
to 100 percent using continuous discounting. In this report the future net
income is discounted at a primary rate of ten (10.0) percent.
GENERAL
Three Forks, Inc. has provided access to all of its accounts, records,
geological and engineering data, reports and other information as required for
this report. The ownership interests, product classifications relating to prices
and other factual data were accepted as furnished without verification.
Titles to the evaluated properties have not been examined by Ralph E. Davis
Associates, Inc., nor has the actual degree or type of interest owned been
independently confirmed. The data used in our evaluation were obtained from
Three Forks, Inc., or from public information sources. A field inspection of the
properties was not made.
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.
Neither Ralph E. Davis Associates, Inc. nor any of its employees have any
interest in Three Forks, Inc. or the properties reported herein. The employment
and compensation to make this study are not contingent on our estimate of
reserves. The technical persons responsible for preparing the estimates
presented herein meet the requirements regarding qualifications, independence,
objectivity and confidentiality set forth in the SPE standards.
Very truly yours,
RALPH E. DAVIS ASSOCIATES, INC.
/s/ David G. Cole
David G. Cole
Sr. Reservoir Engineer
STATE OF TEXAS
/s/ Allen C. Barron SEAL
ALLEN C. BARRON
Allen C. Barron, P.E. 49284
President LICENSED
PROFESSIONAL
ENGINEER
Texas Registered Engineering Firm F-1529