Attached files
| file | filename |
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| 10-K - JOHN D. OIL & GAS CO | v178873_10k.htm |
| EX-32.1 - JOHN D. OIL & GAS CO | v178873_ex32-1.htm |
| EX-31.2 - JOHN D. OIL & GAS CO | v178873_ex31-2.htm |
| EX-31.1 - JOHN D. OIL & GAS CO | v178873_ex31-1.htm |
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Data
& Consulting Services
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Division
of Schlumberger Technology Corporation
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Two
Robinson Plaza, Suite 200
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Pittsburgh,
PA 15205
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Tel: 412-787-5403
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Fax: 412-787-2906
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23 March
2010
John D.
Oil and Gas Company
8500
Station Street Suite 345
Mentor,
Ohio 44060
Dear
Gentlemen:
At the
request of John D. Oil and Gas Company (JohnD), Data & Consulting Services a
Division of Schlumberger Technology Corporation (DCS) has prepared a reserve and
economic evaluation of certain proved producing oil and gas interests as of 31
December 2009. These properties are located in various counties of
Ohio and are operated by JohnD. This report was completed as of the
date of this letter and has been prepared using constant prices and costs and
conforms to our understanding of the U.S. Securities and Exchange Commission
(SEC) guidelines and applicable financial accounting rules. All
prices, costs, and cash flow estimates are expressed in U.S. dollars
(US$). It is our understanding that the properties evaluated by DCS
comprise one hundred percent (100%) of JohnD’s proved producing reserves located
in Ohio. We believe that the assumptions, data, methods, and procedures used in
preparing this report are appropriate for the purpose of this report. The Lead
Evaluator for this evaluation was Charles M. Boyer II, PG, CPG, and his
qualifications, independence, objectivity, and confidentiality meet the
requirements set forth in the Standards Pertaining to the Estimating and
Auditing of Oil and Gas Reserves Information promulgated by the Society of
Petroleum Engineers.
All
properties were evaluated to their economic limit or a maximum remaining reserve
life of 40 years. The economics presented are before federal income taxes
(BFIT). The proved producing reserves values are summarized in Table 1. Actual
future prices may vary significantly from the prices used in this evaluation;
therefore, future hydrocarbon volumes recovered and the income received from
these volumes may vary significantly from those estimated in this
report.
Table
1
Estimated
Net Reserves And Income
Certain
Proved Oil And Gas Interests
John
D. Oil and Gas Company
JohnD
Properties – SEC Report
As
Of 31 December 2009
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John
D
Proved
Producing
Reserves
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Remaining Net Reserves
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Oil
– Mbbls
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28.831 | |||
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Gas
– MMscf
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2,512.786 | |||
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Income Data (M$)
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Future
Net Revenue
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13,860.414 | |||
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Deductions
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Operating
Expense
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8,207.056 | |||
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Production
Taxes
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65.703 | |||
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Investment
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0.000 | |||
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Future
Net Cash Flow
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5,587.655 | |||
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Discounted
PV @ 10% (M$)
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3,690.507 | |||
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Data
& Consulting Services
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Division
of Schlumberger Technology Corporation
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23
March 2010
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Page
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The
values in the tables above may not add up arithmetically or exactly match the
cash flows due to rounding procedures in the computer software program used to
prepare the economic projections.
RESERVES
ESTIMATES
Standard
geological and engineering methods generally accepted by the petroleum industry
were used in the estimation of JohnD’s reserves. Deterministic
methods were used for all reserves included in this
report. Conventional decline curve analysis and production data
analysis methods were used to generate the performance forecast of the producing
wells included in this report. Decline curves were completed using
ARIES™, an industry-accepted reserve evaluation and economic software
package. JohnD provided all production data in an Excel
spreadsheet. No adjustments were made to gas volumes to account for
non-hydrocarbon gases such as nitrogen or CO2.
Reserve
estimates are strictly technical judgments. The accuracy of any
reserve estimate is a function of the quality and quantity of data available and
of the engineering and geological interpretations. The reserve
estimates presented in this report are believed reasonable; however, they are
estimates only and should be accepted with the understanding that reservoir
performance subsequent to the date of the estimate may justify their
revision. As additional production and pressure data becomes
available, these estimates may be revised up or down. Actual future
prices may vary significantly from the prices used in this evaluation;
therefore, future hydrocarbon volumes recovered and the income received from
these volumes may vary significantly from those estimated in this
report. 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.
RESERVE
CATEGORIES
Reserves
were assigned to the proved developed producing (PDP) reserve
category. Oil and gas reserves by definition fall into one of the
following categories: proved, probable, and possible. The
proved category is further divided into: developed and
undeveloped. The developed reserve category is even further divided
into the appropriate reserve status subcategories: producing and
non-producing. Non-producing reserves include shut-in and behind-pipe
reserves. The reserves evaluated in this report conform to the U.S. Securities and Exchange
Commission Regulation S-X, Rule 210.4-10 (a).
In our
opinion the above-described estimates of JohnD’s reserves and supporting data
are, in the aggregate, reasonable and have been prepared in accordance with
generally accepted petroleum engineering and evaluation practices. It is also
our opinion that the above-described estimates of JohnD’s proved reserves
conform to the definitions of proved oil and gas reserves promulgated by the
SEC.
JohnD has
an active exploration and development program to develop their interests in
certain tracts not classified as proved at this time. Future drilling
may result in the reclassification of additional volumes to the proved reserve
category. However, changes in the regulatory requirements for oil and
gas operations may impact future production and development plans and the
ability of the company to recover the estimated proved reserves. The
reserves and income included in this report have not been adjusted to reflect
the varying degrees of risk associated with them.
ECONOMIC
TERMS
Net
revenue (sales) is defined as the total proceeds from the sale of oil,
condensate, natural gas liquids (NGL), and natural gas before any
deductions. Future net cash flow is future net revenue less net lease
operating, transportation, processing, and marketing expenses, and state
severance or production taxes. General and administrative (G&A)
expenses are deducted from future net cash flow for all wells. These
G&A expenses are charged to each particular well or unit on a monthly
basis. Future plugging, abandonment, and salvage costs are not
included in this report. No provisions for State or Federal income
taxes are made in this evaluation. The present worth (discounted
cashflow) at various discount rates is calculated on a monthly
basis.
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Data
& Consulting Services
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Division
of Schlumberger Technology Corporation
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23
March 2010
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Page
3
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PRICING
AND ECONOMIC PARAMETERS
JohnD
provided all pricing and economic parameters used in this
evaluation. All properties were evaluated to economic limit or a
maximum future well life of 40 years. Prices used in preparation of
this report were based on the twelve month unweighted arithmetic average of the
first day of the month price for the period January through December
2009. The resulting Henry Hub gas price used was $3.867/MMBtu and the
resulting West Texas Intermediate oil price used was $61.18/Bbl. The
prices were adjusted for local differentials, gravity and Btu where
applicable. As required by SEC guidelines, all pricing was held
constant for the life of the projects (no escalation). An existing fixed price
contract was honored as a fixed gas price of $7.37/Mscf from January through
March, 2010. This fixed price was applied to all volumes during the contract
period. Adjustments were made for transportation, treating, or
gathering costs based on actual data. Table 2 outlines the economic
assumptions used in this report. Operating costs were
held constant for the life of the evaluation. Future abandonment
costs for the wells were not included in the cash flow projections.
Table
2
Pricing
and Operating Expense Assumptions
John
D. Oil and Gas Company
As
Of 31 December 2009
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John D
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Btu
Factor
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1.05 | |||
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Gas
Price Basis Adjustment, $/MMBtu
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0.6101 | |||
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Oil
Price Basis Adjustment, $/Bbl
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0.00 | |||
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Transportation
Charge, $/Mscf
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1.35 | |||
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Operating
Cost, $/well/month
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585 | |||
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Gas
Severance Tax, $/Mscf
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0.025 | |||
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Oil
Severance Tax, $/Bbl
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0.10 | |||
OWNERSHIP
The
leasehold interests were supplied by JohnD and were accepted as
presented. No attempt was made by the undersigned to verify the title
or ownership of the interests evaluated.
GENERAL
All data
used in this study were obtained from JohnD, public industry information
sources, or the non-confidential files of DCS. A field inspection of
the properties was not made in connection with the preparation of this
report.
The
potential environmental liabilities attendant to ownership and/or operation of
the properties have not been addressed in this report. Abandonment
and clean-up costs and possible salvage value of the equipment were not
considered in this report.
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Data
& Consulting Services
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Division
of Schlumberger Technology Corporation
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23
March 2010
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Page
4
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In the
conduct of our evaluation, we have not independently verified the accuracy and
completeness of information and data furnished by JohnD with respect to
ownership interests, historical gas production, costs of operation and
development, product prices, payout balances, and agreements relating to current
and future operations and sales of production. If in the course of
our examination something came to our attention which brought into question the
validity or sufficiency of any of the information or data provided by JohnD, we
did not rely on such information or data until we had satisfactorily resolved
our questions relating thereto or independently verified such information or
data.
In
evaluating the information at our disposal related to this report, we have
excluded from our consideration all matters which require a legal or accounting
interpretation, or any interpretation other than those of an engineering or
geological nature. In assessing the conclusions expressed in this
report pertaining to all aspects of oil and gas evaluations, especially
pertaining to reserve evaluations, there are uncertainties inherent in the
interpretation of engineering data, and such conclusions represent only informed
professional judgments.
We are
independent with respect to JohnD as provided in the SEC regulations. Neither
the employment of nor the compensation received by DCS was contingent upon the
values estimated for the properties included in this report.
Data and
worksheets used in the preparation of this evaluation will be maintained in our
files in Pittsburgh and will be available for inspection by anyone having proper
authorization by JohnD.
This
report was prepared solely for the use of the party to whom it is addressed and
any disclosure made of this report and/or the contents by said party thereof
shall be solely the responsibility of said party, and shall in no way constitute
any representation of any kind whatsoever of the undersigned with respect to the
matters being addressed.
We
appreciate the opportunity to perform this evaluation and are available should
you need further assistance in this matter.
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Sincerely
yours,
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Charles
M. Boyer II, PG
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Denise
L. Delozier
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Advisor
Unconventional Reservoirs
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Technical
Director of Reserves
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North
America
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