Attached files
file | filename |
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10-K - FORM 10-K - Forestar Group Inc. | d71236e10vk.htm |
EX-31.2 - EX-31.2 - Forestar Group Inc. | d71236exv31w2.htm |
EX-23.1 - EX-23.1 - Forestar Group Inc. | d71236exv23w1.htm |
EX-32.1 - EX-32.1 - Forestar Group Inc. | d71236exv32w1.htm |
EX-31.1 - EX-31.1 - Forestar Group Inc. | d71236exv31w1.htm |
EX-23.2 - EX-23.2 - Forestar Group Inc. | d71236exv23w2.htm |
EX-32.2 - EX-32.2 - Forestar Group Inc. | d71236exv32w2.htm |
EX-21.1 - EX-21.1 - Forestar Group Inc. | d71236exv21w1.htm |
EX-10.22 - EX-10.22 - Forestar Group Inc. | d71236exv10w22.htm |
Exhibit 99.1
[Netherland, Sewell & Associates, Inc. Letterhead]
February 25, 2010
Mr. Flavious J. Smith
Forestar Group Inc.
420 Throckmorton Street, Suite 1150
P.O. Box 116
Fort Worth, Texas 76102
Forestar Group Inc.
420 Throckmorton Street, Suite 1150
P.O. Box 116
Fort Worth, Texas 76102
Dear Mr. Smith:
In accordance with your request, we have estimated the proved developed reserves and future
revenue, as of December 31, 2009, to the Forestar Group Inc. (Forestar) interest in certain oil and
gas properties located in the United States. It is our understanding that the proved reserves
estimated in this report constitute all of the proved reserves owned by Forestar. The estimates in
this report have been prepared in accordance with the definitions and guidelines of the U.S.
Securities and Exchange Commission (SEC) and, with the exception of the exclusion of future income
taxes, conform to the FASB Accounting Standards Codification Topic 932, Extractive ActivitiesOil
and Gas. Definitions are presented immediately following this letter. This report has been
prepared for Forestars use in filing with the SEC.
We estimate the net reserves and future net revenue to the Forestar interest, by property group, in
these properties, as of December 31, 2009, to be:
Net Reserves | Future Net Revenue ($) | |||||||||||||||
Oil | Gas | Present Worth | ||||||||||||||
Property Group/Category | (Barrels) | (MCF) | Total | at 10% | ||||||||||||
Consolidated Accounting
Group Properties |
||||||||||||||||
Proved Developed Producing |
579,930 | 6,659,763 | 49,036,500 | 30,822,800 | ||||||||||||
Equity Accounting Group
Properties |
||||||||||||||||
Proved Developed Producing |
0 | 606,566 | 1,784,000 | 897,800 | ||||||||||||
Proved Developed
Non-Producing |
0 | 1,901,106 | 5,595,300 | 3,011,400 | ||||||||||||
Total Proved Equity
Accounting Group |
0 | 2,507,672 | 7,379,300 | 3,909,200 | ||||||||||||
All Properties |
||||||||||||||||
Proved Developed Producing |
579,930 | 7,266,329 | 50,820,500 | 31,720,600 | ||||||||||||
Proved Developed
Non-Producing |
0 | 1,901,106 | 5,595,300 | 3,011,400 | ||||||||||||
Total Proved |
579,930 | 9,167,435 | 56,415,800 | 34,732,000 |
The oil reserves shown include crude oil, condensate, and natural gas liquids. Oil volumes are
expressed in barrels that are equivalent to 42 United States gallons. Gas volumes are expressed in
thousands of cubic feet (MCF) at standard temperature and pressure bases.
The estimates shown in this report are for proved developed producing and proved developed
non-producing reserves. No study was completed to determine whether proved undeveloped, probable,
or possible reserves might be established for these properties. This report does not include any
value that could be attributed to interests in undeveloped acreage. Reserves categorization
conveys the relative degree of certainty; reserves subcategorization is based on development and
production status. The estimates of reserves and future revenue included herein have not been
adjusted for risk.
4500 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201-4754 Ph: 214-969-5401 Fax: 214-969-5411 | nsai@nsai-petro.com | |
1221 Lamar Street, Suite 1200 Houston, Texas 77010-3072 Ph: 713-654-4950 Fax: 713-654-4951 | netherlandsewell.com |
Future gross revenue to the Forestar interest is prior to deducting state production taxes and ad
valorem taxes. For the majority of these properties Forestar owns no working interest; therefore,
future net revenue is after deductions for these taxes but before consideration of federal income
taxes. For those properties in which Forestar owns a working interest, future net revenue is after
deductions for these taxes and operating expenses but before consideration of federal income taxes.
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, we did not perform any field inspection of the properties, nor did
we examine the mechanical operation or condition of the wells and facilities. Since Forestar owns
a royalty interest rather than a working interest in the majority of these properties, no costs
would be incurred because of abandonment or possible environmental liability, nor would any salvage
value be realized for the lease and well equipment for those properties. For those properties in
which Forestar owns a working interest, we have not investigated possible environmental liability
related to these properties; therefore, our estimates do not include any costs due to such possible
liability. Also, our estimates do not include any salvage value for the lease and well equipment
or the cost of abandoning the properties.
Prices used in this report are based on the 12-month unweighted arithmetic average of the
first-day-of-the-month price for the period January through December 2009. For oil volumes, the
average West Texas Intermediate posted price of $57.65 per barrel is adjusted by state for quality,
transportation fees, and regional price differentials. For gas volumes, the average Henry Hub spot
price of $3.866 per MMBTU is adjusted by state for energy content, transportation fees, and
regional price differentials. All prices are held constant throughout the lives of the properties.
Because Forestar owns no working interest in the majority of these properties, lease and well
operating costs would not be incurred for such properties. However, estimated lease and well
operating costs have been used in the determination of the economic limits for the royalty interest
properties. These cost estimates are based on our knowledge of similar wells in the area. For
certain properties in which Forestar owns a working interest, lease and well operating costs used
in this report are based on operating expense records of the operators, as provided by Forestar.
These costs include the per-well overhead expenses allowed under joint operating agreements along
with estimates of costs to be incurred at and below the district and field levels. For the
remaining working interest properties for which operating expense records were not available,
estimated lease and well operating costs are based on our knowledge of similar wells in the area
and are limited to direct lease- and field-level costs. Headquarters general and administrative
overhead expenses of Forestar are not included. Lease and well operating costs are held constant
throughout the lives of the properties.
We have made no investigation of potential gas volume and value imbalances resulting from
overdelivery or underdelivery to the Forestar 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 Forestar receiving its royalty interest share or net revenue interest
share of estimated future gross gas production.
The reserves shown in this report are estimates only and should not be construed as exact
quantities. Proved reserves are those quantities of oil and gas which, by analysis of engineering
and geoscience data, can be estimated with reasonable certainty to be economically producible. If
the reserves are recovered, the revenues therefrom and the costs related thereto could be more or
less than the estimated amounts. Because of governmental policies and uncertainties of supply and
demand, the sales rates, prices received for the reserves, and costs incurred by Forestar or the
working interest owners in recovering such reserves may vary from assumptions made while preparing
this report. Estimates of reserves may increase or decrease as a result of future operations,
market conditions, or changes in regulations.
For the purposes of this report, we used technical and economic data including, but not limited to,
production data, historical price and cost information, and property ownership interests. The
reserves in this report have been estimated using deterministic methods; these estimates have been
prepared in accordance with generally
accepted petroleum engineering and evaluation principles. We
used standard engineering methods, such as decline curve performance analysis and analogy, that we
considered to be appropriate and necessary to establish reserves quantities and reserves
categorization that conform to SEC definitions and guidelines. In evaluating the information at
our disposal concerning this report, we have excluded from our consideration all matters as to
which the controlling interpretation may be legal or accounting, rather than engineering and
geoscience. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the
interpretation of engineering and geoscience data; therefore, our conclusions necessarily represent
only informed professional judgment.
The titles to the properties have not been examined by Netherland, Sewell & Associates, Inc.
(NSAI), nor has the actual degree or type of interest owned been independently confirmed. The
data used in our estimates were obtained from Forestar, public data sources, and the
nonconfidential files of NSAI and were accepted as accurate. Supporting geoscience, field
performance, and work data are on file in our office. The technical persons responsible for
preparing the reserves estimates presented herein meet the requirements regarding qualifications,
independence, objectivity, and confidentiality set forth in the Standards Pertaining to the
Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum
Engineers. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists;
we do not own an interest in these properties and are not employed on a contingent basis.
Sincerely, NETHERLAND, SEWELL & ASSOCIATES, INC. Texas Registered Engineering Firm F-002699 |
||||
By: | /s/ C.H. (Scott) Rees III | |||
C.H. (Scott) Rees III, P.E. | ||||
Chairman and Chief Executive Officer | ||||
By: | /s/ David T. Miller | |||
David T. Miller, P.E. 96134 | ||||
Vice President | ||||
Date Signed: February 25, 2010 | ||||
JAD:ABB