Attached files
Exhibit 99.2
January 20, 2010
Mr. Robert N. Wagner
Quicksilver Resources, Inc.
777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
Quicksilver Resources, Inc.
777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
Dear Mr. Wagner:
At your request, LaRoche Petroleum Consultants, Ltd. (LPC) has estimated the proved reserves
and future cash flow, as of December 31, 2009, to the Quicksilver Resources, Inc. (Quicksilver)
interest in certain properties located in Alberta and British Columbia Provinces, Canada. This
report was completed as of the date of this letter. This report was prepared to provide Quicksilver
with U.S. Securities and Exchange Commission (SEC) compliant reserve estimates. It is our
understanding that the properties evaluated by LPC comprise one hundred percent (100%) of
Quicksilvers proved reserves located in Canada. We believe that the assumptions, data, methods,
and procedures used in preparing this report, as set out below, are appropriate for the purpose of
this report. This report has been prepared using constant prices and costs and conforms to our
understanding of the SEC guidelines and applicable financial accounting rules. All prices, costs,
and cash flow estimates are expressed in United States dollars (US$)
It is our understanding that the reserves for the properties located in Canada represent
twelve percent (12%) of Quicksilvers aggregate proved reserves.
Summarized below are our estimates of net reserves and future net cash flow. Future net
revenue is after deducting estimated Crown royalties but prior to deducting freehold mineral taxes.
Future net cash flow is after deducting freehold mineral taxes, operating expenses, future capital
expenditures, and abandonment costs but before consideration of Canadian or United States income
taxes. The discounted cash flow values included in this report are intended to represent the time
value of money and should not be construed to represent an estimate of fair market value. All
prices, costs, and cash flow estimates are expressed in United States dollars (US$). We estimate
the net reserves and future net cash flow to the Quicksilver interest, as of December 31, 2009, to
be:
Net Proved Reserves and Net Cash Flow(1) | ||||||||||||||||
Category | Producing | Non-Producing | Undeveloped | Total(2) | ||||||||||||
Net Remaining Reserves |
||||||||||||||||
Oil - MBbl |
0 | 0 | 0 | 0 | ||||||||||||
Gas - MMcf |
201,325 | 21,974 | 29,753 | 253,053 | ||||||||||||
NGL - MBbl |
13 | 0 | 0 | 13 | ||||||||||||
Income Data (US M$) |
||||||||||||||||
Future Net Revenue (US M$) |
365,252 | 32,138 | 21,912 | 419,302 | ||||||||||||
Discounted PV @ 10% (US M$) |
224,497 | 17,239 | 1,173 | 242,909 |
(1) | Includes reserves and cash flow attributable to split-title properties. For proved developed producing,
split-title cases contribute 4,008 MMCF of net gas reserves and M $5,284 of the PV discounted at 10%. For proved
developed non-producing, the contribution is 3,978 MMCF of net gas reserves and M $2,762 of the PV discounted at 10%.
For proved undeveloped, the contribution is 18,244 MMCF of net gas and M$ -63 of the PV10%. |
|
(2) | The total proved column may not match the sum of the detailed economic summaries by reserve category due
to rounding by the economics program.
|
Exhibit 99.2
The oil reserves include crude oil and condensate. Oil and NGL reserves are expressed in
barrels, which are equivalent to 42 United States gallons. Gas reserves are expressed in thousands
of standard cubic feet (Mcf) at the contract temperature and pressure bases.
The estimated reserves and future cash flow shown in this report are for proved developed
producing reserves and, for certain properties, proved developed non-producing and proved
undeveloped reserves. This report does not include any value that could be attributed to interests
in undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated.
Both the gross and net gas reserves presented in this report are after shrinkage. All prices,
revenues, expenses, and cash flows referenced in this report are in United States dollars which
have been converted from Canadian currency using the December 31, 2009 exchange rate.
Estimates of reserves were prepared using standard geological and engineering methods
generally accepted by the petroleum industry. The reserves in this report have been estimated
using deterministic methods. The method or combination of methods utilized in the evaluation of
each reservoir included consideration of the stage of development of the reservoir, quality and
completeness of basic data, and production history. Recovery from various reservoirs and leases
was estimated after consideration of the type of energy inherent in the reservoirs, the structural
positions of the properties, and reservoir and well performance. In some instances, comparisons
were made to similar properties for which more complete data were available. We have excluded from
our consideration all matters as to which the controlling interpretation may be legal or
accounting, rather than engineering or geoscience.
The estimated reserves and future cash flow amounts in this report are related to hydrocarbon
prices. Historical prices through December 2009 were used in the preparation of this report as
required by SEC guidelines; however, actual future prices may vary significantly from the SEC
prices. In addition, future changes in environmental and administrative regulations may
significantly affect the ability of Quicksilver to produce oil and gas at the projected levels.
Therefore, volumes of reserves actually recovered and amounts of cash flow actually generated may
differ significantly from the estimated quantities presented in this report.
Prices used in this report are based on the twelve-month unweighted arithmetic average of the
first day of the month price for the period January through December 2009. Gas prices are
referenced to an AECO price of US $3.76 per MMBtu adjusted for energy content, transportation fees,
and regional price differentials. Oil and NGL prices used in this report are referenced to a West
Texas Intermediate crude oil price of US $61.18 per barrel adjusted for gravity, transportation
fees, and regional price differentials. These reference prices are held constant in accordance
with SEC guidelines.
Lease and well operating expenses are based on data obtained from Quicksilver. Expenses for
the properties operated by Quicksilver include allocated overhead costs, direct lease and field
level costs as well as compression costs and marketing expenses. Wells operated by others include
all direct expenses as well as general, administrative, and overhead costs allowed under the
specific joint operating agreements. Lease and well operating costs are held constant in
accordance with SEC guidelines.
Capital costs and timing of all investments have been provided by Quicksilver and are included
as required for workovers, new development wells, and production equipment.
Exhibit 99.2
Quicksilver has
represented to us that they have the ability and intent to implement their capital expenditure
program as scheduled. These costs are held constant.
LPC has made no investigation of possible gas volume and value imbalances that may have
resulted from the overdelivery or underdelivery to the Quicksilver interest. Our projections are
based on the Quicksilver interest receiving its net revenue interest share of estimated future
gross oil and gas production.
Technical information necessary for the preparation of the reserve estimates herein was
furnished by Quicksilver or was obtained from state regulatory agencies and commercially available
data sources. No special tests were obtained to assist in the preparation of this report. For the
purpose of this report, the individual well test and production data as reported by the above
sources were accepted as represented together with all other factual data presented by Quicksilver
including the extent and character of the interest evaluated. The reserves in this report include
volumes subject to split-title issues for which we have accepted the ownership as presented by
Quicksilver.
An on-site inspection of the properties has not been performed nor have we examined the
mechanical operation or condition of the wells and their related facilities. Quicksilvers
estimates of the cost to plug and abandon the wells net of salvage value are included at the end of
the economic life of each well. However, the costs associated with the continued operation of
uneconomic properties are not reflected in the cash flows.
The evaluation of potential environmental liability from the operation and abandonment of the
properties is beyond the scope of this report. In addition, no evaluation was made to determine
the degree of operator compliance with current environmental rules, regulations, and reporting
requirements. Therefore, no estimate of the potential economic liability, if any, from
environmental concerns is included in the projections presented herein.
The reserves included in this report are estimates only and should not be construed as exact
quantities. They may or may not be recovered; if recovered, the revenues therefrom and the costs
related thereto could be more or less than the estimated amounts. These estimates should be
accepted with the understanding that future development, production history, changes in
regulations, product prices, and operating expenses would probably cause us to make revisions in
subsequent evaluations. A portion of these reserves are for behind-pipe zones, undeveloped
locations, and producing wells that lack sufficient production history to utilize
performance-related reserve estimates. Therefore, these reserves are based on estimates of
reservoir volumes and recovery efficiencies along with analogies to similar production. These
reserve estimates are subject to a greater degree of uncertainty than those based on substantial
production and pressure data. It may be necessary to revise these estimates up or down in the
future as additional performance data become available. As in all aspects of oil and gas
evaluation, there are uncertainties inherent in the interpretation of engineering and geological
data; therefore, our conclusions represent informed professional judgments only, not statements of
fact.
This report is solely for the use of Quicksilver, its agents, and its representatives in their
evaluation of these properties and is not to be used, circulated, quoted, or otherwise referenced
for any other purpose without the express written consent of the undersigned. Persons other than
those to whom this report is addressed shall not be entitled to rely upon the report unless it is
accompanied by such consent.
The technical persons responsible for preparing the reserve estimates presented herein meet
the requirements regarding qualifications, independence, objectivity, and confidentiality set
Exhibit 99.2
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 and geophysicists and are not employed on a contingent basis. Data pertinent to this
report are maintained on file in our office.
Very truly yours, LaRoche Petroleum Consultants, Ltd. State of Texas Registration Number F-1360 /s/ Joe A. Young Joe A. Young Licensed Professional Engineer State of Texas No. 62866 /s/ Stephen W. Daniel Stephen W. Daniel Licensed Professional Engineer State of Texas No. 58581 |
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JAY:lbm
09-910
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