Attached files
file | filename |
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S-1 - FORM S-1 - Oasis Petroleum Inc. | h69816sv1.htm |
EX-23.2 - EX-23.2 - Oasis Petroleum Inc. | h69816exv23w2.htm |
EX-99.2 - EX-99.2 - Oasis Petroleum Inc. | h69816exv99w2.htm |
EX-99.1 - EX-99.1 - Oasis Petroleum Inc. | h69816exv99w1.htm |
EX-23.3 - EX-23.3 - Oasis Petroleum Inc. | h69816exv23w3.htm |
EX-23.1 - EX-23.1 - Oasis Petroleum Inc. | h69816exv23w1.htm |
EX-10.1 - EX-10.1 - Oasis Petroleum Inc. | h69816exv10w1.htm |
Exhibit 99.3
DeGolyer and MacNaughton
5001 Spring Valley Road
Suite 800 East
Dallas, Texas 75244
5001 Spring Valley Road
Suite 800 East
Dallas, Texas 75244
This is a digital representation of a DeGolyer and MacNaughton report.
Each file contained herein is intended to be a manifestation of certain data in the subject
report and as such is subject to the definitions, qualifications, explanations, conclusions, and
other conditions thereof. The information and data contained in each file may be subject to
misinterpretation; therefore, the signed and bound copy of this report should be considered the
only authoritative source of such information.
DeGolyer
and MacNaughton
5001 Spring Valley Road
Suite 800 East
Dallas, Texas 75244
5001 Spring Valley Road
Suite 800 East
Dallas, Texas 75244
February 23, 2010
Oasis Petroleum LLC,
1001 Fannin, Suite 202
Houston, Texas, 77002
1001 Fannin, Suite 202
Houston, Texas, 77002
Gentlemen:
Pursuant to your request, we have prepared estimates of the extent and value of the net proved
crude oil, condensate, and natural gas reserves, as of December 31, 2009, of certain properties
owned by Oasis Petroleum LLC (Oasis). The properties appraised consist of working and royalty
interests located in the states of Montana, North Dakota, and Texas. Oasis has represented that
these properties account for 100 percent of proved reserves.
Estimates of proved reserves presented in this report have been prepared in compliance with
the regulations promulgated by the United States Securities and Exchange Commission (SEC). These
reserves definitions are discussed in detail under the Definition of Reserves heading of this
letter.
Reserves included herein are expressed as gross and net reserves. Gross reserves are defined
as the total estimated petroleum to be produced from these properties after December 31, 2009. Net
reserves are defined as that portion of the gross reserves attributable to the interests owned by
Oasis after deducting all royalties and interests owned by others. Gas quantities shown herein are
sales-gas quantities and are expressed at a temperature base of 60 degrees Fahrenheit and at the
legal pressure base of the state in which the interest is located. Sales gas is defined as the
total gas to be produced from the reservoirs, measured at the point of delivery, after reduction
for fuel usage, flare, and shrinkage resulting from field separation and processing. Condensate
reserves estimated herein are those to be recovered by normal field separation.
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Values of proved reserves shown herein are expressed in terms of estimated future gross
revenue, future net revenue, and present worth of future net revenue. Future gross revenue is that
revenue which will accrue to the appraised interests from the production and sale of the estimated
net reserves. Future net revenue is calculated by deducting estimated production taxes, ad valorem
taxes, operating expenses, and investments from future gross revenue. Operating expenses include
field operating expenses, transportation expenses, compression charges, and an allocation of
overhead that directly relates to production activities. Future income tax expenses were not taken
into account in the preparation of these estimates. Present worth is defined as future net revenue
discounted at 10 percent per annum over the expected period of realization.
Estimates of oil, condensate, and natural gas and future net revenue should be regarded only
as estimates that may change as further production history and additional information become
available. Not only are such reserves estimates based on that information which is currently
available, but such estimates are also subject to the uncertainties inherent in the application
of judgmental factors in interpreting such information.
Data used in this report were obtained from Oasis, from records on file with the appropriate
regulatory agencies, and from public sources. Additionally, this information includes data supplied
by Petroleum Information/Dwights LLC; Copyright 2010 Petroleum Information/Dwights LLC. In the
preparation of this report we have relied, without independent verification, upon such information
furnished by Oasis with respect to property interests appraised, production from such properties,
current costs of operation and development, current prices for production, agreements relating to
current and future operations and sale of production, and various other information and data that
were accepted as represented. A field examination of the properties was not considered necessary
for the purposes of this report.
Methodology and Procedures
Estimates of reserves were prepared by the use of standard geological and engineering methods
generally accepted by the petroleum industry. The method or combination of methods used in the
analysis of each reservoir was tempered by experience with similar reservoirs, stage of
development, quality and completeness of basic data, and production history.
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When applicable, the volumetric method was used to estimate the original oil in place
(OOIP) and the original gas in place (OGIP). Structure and isopach maps were constructed to
estimate reservoir volume. Electrical logs, radioactivity logs, core analyses, and other available
data were used to prepare these maps as well as to estimate representative values for porosity and
water saturation. When adequate data were available and when circumstances justified, material
balance and other engineering methods were used to estimate OOIP or OGIP.
Estimates of ultimate recovery were obtained after applying recovery factors to OOIP or OGIP.
These recovery factors were based on consideration of the type of energy inherent in the
reservoirs, analyses of the petroleum, the structural positions of the properties, and the
production histories. When applicable, material balance and other engineering methods were used to
estimate recovery factors. An analysis of reservoir performance, including production rate,
reservoir pressure, and gas-oil ratio behavior, was used in the estimation of reserves.
For depletion-type reservoirs or those whose performance disclosed a reliable decline in
producing-rate trends or other diagnostic characteristics, reserves were estimated by the
application of appropriate decline curves or other performance relationships. In the analyses of
production-decline curves, reserves were estimated only to the limits of economic production or to
the limit of the production licenses as appropriate.
Definition of Reserves
Petroleum reserves included in this report are classified as proved. Only proved reserves have
been evaluated for this report. Reserves classifications used in this report are in accordance with
the reserves definitions of Rules 4-10(a) (1)-(32) of Regulation S-X of the SEC. Reserves are
judged to be economically producible in future years from known reservoirs under existing economic
and operating conditions and assuming continuation of current regulatory practices using
conventional production methods and equipment. In the analyses of production-decline curves,
reserves were estimated only to the limit of economic rates of production under existing economic
and operating conditions using prices and costs consistent with the effective date of this report,
including consideration of changes in existing prices provided only by contractual arrangements but
not including escalations based upon future conditions. The petroleum reserves are classified as
follows:
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Proved oil and gas reserves - Proved oil and gas reserves are those
quantities of oil and gas, which, by analysis of geoscience and engineering data,
can be estimated with reasonable certainty to be economically produciblefrom a
given date forward, from known reservoirs, and under existing economic conditions,
operating methods, and government regulationsprior to the time at which contracts
providing the right to operate expire, unless evidence indicates that renewal is
reasonably certain, regardless of whether deterministic or probabilistic methods
are used for the estimation. The project to extract the hydrocarbons must have
commenced or the operator must be reasonably certain that it will commence the
project within a reasonable time.
(i) The area of the reservoir considered as proved includes: (A) The
area identified by drilling and limited by fluid contacts, if any, and (B)
Adjacent undrilled portions of the reservoir that can, with reasonable
certainty, be judged to be continuous with it and to contain economically
producible oil or gas on the basis of available geoscience and engineering
data.
(ii) In the absence of data on fluid contacts, proved quantities in a
reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a
well penetration unless geoscience, engineering, or performance data and
reliable technology establishes a lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a
highest known oil (HKO) elevation and the potential exists for an
associated gas cap, proved oil reserves may be assigned in the
structurally higher portions of the reservoir only if geoscience,
engineering, or performance data and reliable technology establish the
higher contact with reasonable certainty.
(iv) Reserves which can be produced economically through application
of improved recovery techniques (including, but not limited to, fluid
injection) are included in the proved classification when:
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(A) Successful testing by a pilot project in an area of the reservoir
with properties no more favorable than in the reservoir as a whole, the
operation of an installed program in the reservoir or an analogous
reservoir, or other evidence using reliable technology establishes the
reasonable certainty of the engineering analysis on which the project or
program was based; and (B) The project has been approved for development
by all necessary parties and entities, including governmental entities.
(v) Existing economic conditions include prices and costs at which
economic producibility from a reservoir is to be determined. The price
shall be the average price during the 12-month period prior to the ending
date of the period covered by the report, determined as an unweighted
arithmetic average of the first-day-of-the-month price for each month
within such period, unless prices are defined by contractual arrangements,
excluding escalations based upon future conditions.
Developed oil and gas reserves - Developed oil and gas reserves are
reserves of any category that can be expected to be recovered:
(i) Through existing wells with existing equipment and operating
methods or in which the cost of the required equipment is relatively minor
compared to the cost of a new well; and
(ii) Through installed extraction equipment and infrastructure operational
at the time of the reserves estimate if the extraction is by means not
involving a well.
Undeveloped oil and gas reserves - Undeveloped oil and gas
reserves are reserves of any category that are expected to be recovered from new
wells on undrilled acreage, or from existing wells where a relatively major
expenditure is required for recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly
offsetting development spacing areas that are reasonably certain of
production when drilled, unless evidence
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using reliable technology exists that establishes reasonable certainty of
economic producibility at greater distances.
(ii) Undrilled locations can be classified as having undeveloped
reserves only if a development plan has been adopted indicating that they
are scheduled to be drilled within five years, unless the specific
circumstances, justify a longer time.
(iii) Under no circumstances shall estimates for undeveloped reserves
be attributable to any acreage for which an application of fluid injection
or other improved recovery technique is contemplated, unless such
techniques have been proved effective by actual projects in the same
reservoir or an analogous reservoir, as defined in [section 210.4-10 (a)
Definitions], or by other evidence using reliable technology establishing
reasonable certainty.
Primary Economic Assumptions
Revenue values in this report were estimated using the initial prices and costs specified by
Oasis. Future prices were estimated using guidelines established by the SEC and the Financial
Accounting Standards Board (FASB). The initial and future prices used in this report are adjusted
to prices on December 31, 2009. The following economic assumptions were used for estimating
existing and future prices and costs:
Oil, Condensate, and Natural Gas Prices
Oil and condensate price differentials for each property were
provided by Oasis. The prices were calculated using these differentials to
a posted WTI price of $61.04 per barrel and were held constant for the
lives of the properties. Oil and condensate prices were calculated using
the differentials furnished by Oasis for each lease to the WTI price of
$61.04 per barrel and held constant thereafter. The WTI price of $61.04 is
the 12-month average price calculated as the unweighted arithmetic average
of the first-day-of-the-month
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price for each month within the 12-month period prior to December
31, 2009.
Gas price differentials for each property were provided by Oasis. The
prices were calculated using these differentials to a Henry Hub price of
$3.87 per million British thermal units (MMBtu) and were held constant for
the lives of the properties. The Henry Hub gas price of $3.87 per MMBtu is
the 12-month average price, calculated as the unweighted arithmetic
average of the first-day-of-the-month price for each month within the
12-month period prior to December 31,2009.
The weighted average prices over the lives of the properties were $51.89
per barrel of oil and $3.80 per thousand cubic feet of gas.
Operating Expenses and Capital Costs
Estimates of operating expenses and capital costs based on
current costs were used for the lives of the properties with no increases
in the future based on inflation. In certain cases, future costs, either
higher or lower than current costs, may have been used because of
anticipated changes in operating conditions. Future capital costs were
estimated using expected 2010 values and were not adjusted for inflation.
Abandonment costs, net of salvage, were provided by Oasis for certain
properties.
While the oil and gas industry may be subject to regulatory changes from time to time that
could affect an industry participants ability to recover its oil and gas reserves, we are not
aware of any such governmental actions which would restrict the recovery of the December 31, 2009,
estimated oil and gas volumes. The reserves estimated in this report can be produced under current
regulatory guidelines.
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Summary Reserves and Revenues
The estimates of net proved reserves attributable to Oasis from the properties
appraised, as of December 31, 2009, are summarized as follows, expressed in thousands of barrels
(Mbbl) and millions of cubic feet (MMcf):
Net Reserves | ||||||||||||
Oil and | Sales | |||||||||||
Condensate | NGL | Gas | ||||||||||
(Mbbl) | (Mbbl) | (MMcf) | ||||||||||
Proved |
||||||||||||
Developed Producing |
5,231 | 0 | 2,293 | |||||||||
Undeveloped |
7,190 | 0 | 2,977 | |||||||||
Total Proved |
12,421 | 0 | 5,270 |
The estimated future revenue to be derived from the production and sale of the proved
reserves, as of December 31, 2009, of the properties appraised is summarized as follows, expressed
in thousands of dollars (M$):
Proved | ||||||||||||||||
Developed | Developed | Total | ||||||||||||||
Producing | Nonproducing | Undeveloped | Proved | |||||||||||||
Future Gross Revenue M$ |
279,919 | 0 | 384,561 | 664,480 | ||||||||||||
Production Tax, M$ |
30,065 | 0 | 43,445 | 73,510 | ||||||||||||
Ad Valorem Tax, M$ |
1,752 | 0 | 0 | 1,752 | ||||||||||||
Operating Expenses, M$ |
101,700 | 0 | 81,175 | 182,875 | ||||||||||||
Investment Costs, M$ |
0 | 0 | 113,243 | 113,243 | ||||||||||||
Abandonment Costs, M$ |
5,216 | 0 | 1,753 | 6,969 | ||||||||||||
Future Net Revenue, M$ |
141,186 | 0 | 144,945 | 286,131 | ||||||||||||
Present Worth at 10 Percent, M$ |
88,201 | 0 | 45,329 | 133,530 |
Note: Future income taxes have not been taken into account in the preparation of
these estimates.
In our opinion, the information relating to estimated proved reserves, estimated future
net revenue from proved reserves, and present worth of estimated future net revenue from proved
reserves of oil, condensate, natural gas liquids, and gas contained in this report has been
prepared in accordance with Paragraphs 932-235-50-4, 932-235-50-6, 932-235-50-7, 932-235-50-9,
932-235-50-30, and 932-235-50-31(a), (b), and (e) of the Accounting Standards Update 932-235-50,
Extractive Industries - Oil and Gas (Topic 932); Oil and Gas Reserve Estimation and Disclosures
(January 2010) of the Financial Accounting Standards Board and Rules 4-10(a) (1)-(32) of Regulation
S-X and Rules 302(b), 1201, 1202(a) (1), (2), (3), (4), (8), and 1203(a) of Regulation S-K of the
Securities and Exchange Commission;
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provided, however, future income tax expenses have not been taken into account in
estimating the future net revenue and present worth values set forth herein.
DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that
has been providing petroleum consulting services throughout the world for over 70 years.
DeGolyer and MacNaughton does not have any financial interest, including stock ownership, in
Oasis. Our fees were not contingent on the results of our evaluation. This letter report has
been prepared at the request of Oasis and should not be used for purposes other than those
for which it is intended. DeGolyer and MacNaughton has used all procedures and methods that
it considers necessary to prepare this report.
DeGolyer and MacNaughton
CERTIFICATE of QUALIFICATION
I, Paul J. Szatkowski, Petroleum Engineer with DeGolyer and MacNaughton, 5001 Spring
Valley Road, Suite 800 East, Dallas, Texas, 75244 U.S.A., hereby certify:
1. | That I am a Senior Vice President with DeGolyer and MacNaughton, which company did prepare the letter report addressed to Oasis, Inc. dated February 23, 2010, and that I, as Senior Vice President, was responsible for the preparation of this report. | ||
2. | That I attended Texas A&M University, and that I graduated with a Bachelor of Science degree in Petroleum Engineering in the year 1974; that I am a Registered Professional Engineer in the State of Texas; that I am a member of the International Society of Petroleum Engineers and the American Association of Petroleum Geologists; and that I have in excess of 35 years of experience in the oil and gas reservoir studies and reserves evaluations. | ||
Signed: February 23, 2010 |