Attached files
file | filename |
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10-K/A - FORM 10-K/A - APACHE CORP | h75797e10vkza.htm |
EX-31.1 - EX-31.1 - APACHE CORP | h75797exv31w1.htm |
EX-31.2 - EX-31.2 - APACHE CORP | h75797exv31w2.htm |
EX-23.2 - EX-23.2 - APACHE CORP | h75797exv23w2.htm |
Exhibit 99.1
APACHE CORPORATION
Estimated
Future Reserves
Attributable to Certain
Leasehold and Royalty Interests
SEC Parameters
As of
December 31, 2009
\s\ Jennifer A. Fitzgerald | \s\ Michael F. Stell | |
Jennifer A. Fitzgerald, P.E. TBPE License No. 100572 |
Michael F. Stell, P.E. TBPE License No. 56416 |
|
Senior Petroleum Engineer | Managing Senior Vice President |
RYDER SCOTT COMPANY, L.P.
TBPE Firm Registration No. F-1580
TBPE Firm Registration No. F-1580
[SEAL] | [SEAL] |
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
TBPE REGISTERED ENGINEERING FIRM F-1580 | FAX (713) 651-0849 | |||
1100 LOUISIANA SUITE 3800 | HOUSTON, TEXAS 77002-5235 | TELEPHONE (713) 651-9191 |
February 8, 2010
Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Gentlemen:
At the request of Apache Corporation (Apache), Ryder Scott Company (Ryder Scott) has conducted
a reserves audit of the estimates of the proved reserves as prepared by Apaches engineering and
geological staff based on the definitions and disclosure guidelines of the United States Securities
and Exchange Commission (SEC) contained in Title 17, Code of Federal Regulations, Modernization of
Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC
regulations). Our third party reserves audit, completed on February 1, 2010 and presented herein,
was prepared for public disclosure by Apache in filings made with the SEC in accordance with the
disclosure requirements set forth in the SEC regulations. The estimated reserves shown herein
represent Apaches estimated net reserves attributable to the leasehold and royalty interests in
certain properties owned by Apache and the portion of those reserves reviewed by Ryder Scott, as of
December 31, 2009. The properties reviewed by Ryder Scott incorporate Apache reserve
determinations and are attributable to interest of Apache Corporation (U.S.A.), Apache Canada Ltd.
(Canada), Apache Energy Limited (Australia), Apache Egypt Companies (Egypt), Apache Petrolera
Argentina S.A. (Argentina), and Apache North Sea Limited (United Kingdom).
The properties reviewed by Ryder Scott account for a portion of Apaches total net proved
reserves as of December 31, 2009. Based on the estimates of total net proved reserves prepared by
Apache, the reserves audit conducted by Ryder Scott addresses 85.9 percent of the total proved
developed net liquid hydrocarbon reserves, 78.6 percent of the total proved developed net gas
reserves, 36.3 percent of the total proved undeveloped net liquid hydrocarbon reserves, and 43.3
percent of the total proved undeveloped net gas reserves of Apache.
The wells or locations for which estimates of reserves were reviewed by Ryder Scott were
selected by Apache. Apache informed Ryder Scott that the selected reserves for each country
included at least 72 percent or more of the total discounted future net income at 10 percent
attributable to the total interests of Apache (coverage). Total coverage of world-wide reserves is
79.0 percent of the total discounted future net income at 10 percent. Coverage of reserves by
region is 72.3 percent for USA; 80.1 percent, Canada; 99.8 percent, Australia; 82.3 percent, Egypt;
92.1 percent, Argentina; and 74.4 percent, United Kingdom of the discounted future net income at 10
percent.
1200, 530 8TH AVENUE, S.W. CALGARY, ALBERTA T2P 3S8 621 17TH STREET, SUITE 1550 DENVER, COLORADO 80293-1501 |
TEL (403) 262-2799 TEL (303) 623-9147 |
FAX (403) 262-2790 FAX (303) 623-4258 |
Apache Corporation
February 8, 2010
Page 2
February 8, 2010
Page 2
As prescribed by the Society of Petroleum Engineers in Paragraph 2.2(f) of the Standards
Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information (SPE auditing
standards), a reserves audit is defined as the process of reviewing certain of the pertinent facts
interpreted and assumptions made that have resulted in an estimate of reserves prepared by others
and the rendering of an opinion about (1) the appropriateness of the methodologies employed; (2)
the adequacy and quality of the data relied upon; (3) the depth and thoroughness of the reserves
estimation process; (4) the classification of reserves appropriate to the relevant definitions
used; and (5) the reasonableness of the estimated reserve quantities.
Based on our review, including the data, technical processes and interpretations presented by
Apache, it is our opinion that the overall procedures and methodologies utilized by Apache in
preparing their estimates of the proved reserves as of December 31, 2009 comply with the current
SEC regulations and that the overall proved reserves for the reviewed properties as estimated by
Apache are, in the aggregate, reasonable within the established audit tolerance guidelines of 10
percent as set forth in the SPE auditing standards.
The estimated reserves presented in this report are related to hydrocarbon prices. Apache has
informed us that in the preparation of their reserve and income projections, as of December 31,
2009, they used average prices during the 12-month period prior to the ending date of the period
covered in this report, determined as the unweighted arithmetic averages of the prices in effect on
the first-day-of-the-month for each month within such period, unless prices were defined by
contractual arrangements, as required by the SEC regulations. Actual future prices may vary
significantly from the prices required by SEC regulations; therefore, volumes of reserves actually
recovered and the amounts of income actually received may differ significantly from the estimated
quantities presented in this report. The net reserves as estimated by Apache attributable to
Apaches interest in properties that we reviewed and the reserves of properties that we did not
review are summarized as follows:
SEC PARAMETERS
Estimated Net Remaining Proved Reserves
Attributable to the Interests of
Apache Corporation (Total All Regions)
As of December 31, 2009
Estimated Net Remaining Proved Reserves
Attributable to the Interests of
Apache Corporation (Total All Regions)
As of December 31, 2009
Reviewed by Ryder Scott | Not Reviewed | Total | ||||||||||||||||||||||||||||||
% Liquids | % Gas | Hydrocarbon | Sales | Hydrocarbon | Sales | Hydrocarbon | Sales | |||||||||||||||||||||||||
Reserves | Reserves | Liquids | Gas | Liquids | Gas | Liquids | Gas | |||||||||||||||||||||||||
Reviewed | Reviewed | MBarrels | MMCF | MBarrels | MMCF | MBarrels | MMCF | |||||||||||||||||||||||||
Proved Developed Reserves |
85.9 | 78.6 | 654,867 | 4,118,693 | 107,820 | 1,118,571 | 762,687 | 5,237,264 | ||||||||||||||||||||||||
Proved Undeveloped Reserves |
36.3 | 43.3 | 110,680 | 1,107,140 | 193,881 | 1,451,626 | 304,561 | 2,558,766 | ||||||||||||||||||||||||
Total Proved Reserves |
71.7 | 67.0 | 765,547 | 5,225,833 | 301,701 | 2,570,197 | 1,067,248 | 7,796,030 |
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
Page 3
February 8, 2010
Page 3
SEC PARAMETERS
Estimated Net Remaining Proved Reserves
Attributable to the Interests of
Apache Corporation (Summary by Region)
As of December 31, 2009
Estimated Net Remaining Proved Reserves
Attributable to the Interests of
Apache Corporation (Summary by Region)
As of December 31, 2009
Reviewed by Ryder Scott | Not Reviewed | Total | ||||||||||||||||||||||||||||||
% Liquids | % Gas | Hydrocarbon | Sales | Hydrocarbon | Sales | Hydrocarbon | Sales | |||||||||||||||||||||||||
Reserves | Reserves | Liquids | Gas | Liquids | Gas | Liquids | Gas | |||||||||||||||||||||||||
Reviewed | Reviewed | MBarrels | MMCF | MBarrels | MMCF | MBarrels | MMCF | |||||||||||||||||||||||||
USA |
||||||||||||||||||||||||||||||||
Proved Developed |
84.4 | 72.6 | 314,957 | 1,295,153 | 58,053 | 490,002 | 373,010 | 1,785,155 | ||||||||||||||||||||||||
Proved Undeveloped |
36.9 | 20.9 | 55,627 | 136,567 | 94,999 | 516,199 | 150,626 | 652,766 | ||||||||||||||||||||||||
Total Proved |
70.8 | 58.7 | 370,584 | 1,431,720 | 153,052 | 1,006,201 | 523,636 | 2,437,921 | ||||||||||||||||||||||||
Canada |
||||||||||||||||||||||||||||||||
Proved Developed |
89.3 | 73.6 | 79,708 | 1,056,440 | 9,514 | 379,712 | 89,222 | 1,436,152 | ||||||||||||||||||||||||
Proved Undeveloped |
0.0 | 0.0 | 2 | 294 | 57,551 | 868,902 | 57,553 | 869,196 | ||||||||||||||||||||||||
Total Proved |
54.3 | 45.8 | 79,710 | 1,056,734 | 67,065 | 1,248,614 | 146,775 | 2,305,348 | ||||||||||||||||||||||||
Australia |
||||||||||||||||||||||||||||||||
Proved Developed |
89.6 | 92.2 | 31,044 | 645,180 | 3,618 | 54,782 | 34,662 | 699,962 | ||||||||||||||||||||||||
Proved Undeveloped |
99.1 | 100.0 | 43,396 | 661,479 | 383 | 0 | 43,779 | 661,479 | ||||||||||||||||||||||||
Total Proved |
94.9 | 96.0 | 74,440 | 1,306,659 | 4,001 | 54,782 | 78,441 | 1,361,441 | ||||||||||||||||||||||||
Egypt |
||||||||||||||||||||||||||||||||
Proved Developed |
72.1 | 94.6 | 70,520 | 792,783 | 27,266 | 45,217 | 97,786 | 838,000 | ||||||||||||||||||||||||
Proved Undeveloped |
65.5 | 96.2 | 11,655 | 308,800 | 6,152 | 12,341 | 17,807 | 321,141 | ||||||||||||||||||||||||
Total Proved |
71.1 | 95.0 | 82,175 | 1,101,583 | 33,418 | 57,558 | 115,593 | 1,159,141 | ||||||||||||||||||||||||
Argentina |
||||||||||||||||||||||||||||||||
Proved Developed |
77.1 | 69.6 | 20,032 | 329,137 | 5,954 | 144,007 | 25,986 | 473,144 | ||||||||||||||||||||||||
Proved Undeveloped |
0.0 | 0.0 | 0 | 0 | 5,103 | 54,184 | 5,103 | 54,184 | ||||||||||||||||||||||||
Total Proved |
64.4 | 62.4 | 20,032 | 329,137 | 11,057 | 198,191 | 31,089 | 527,328 | ||||||||||||||||||||||||
United Kingdom |
||||||||||||||||||||||||||||||||
Proved Developed |
97.6 | 0.0 | 138,606 | 0 | 3,415 | 4,851 | 142,021 | 4,851 | ||||||||||||||||||||||||
Proved Undeveloped |
0.0 | 0.0 | 0 | 0 | 29,693 | 0 | 29,693 | 0 | ||||||||||||||||||||||||
Total Proved |
80.7 | 0.0 | 138,606 | 0 | 33,108 | 4,851 | 171,714 | 4,851 |
Liquid hydrocarbons are expressed in standard 42 gallon barrels. All gas volumes are
reported on an as sold basis expressed in millions of cubic feet (MMCF) at the official
temperature and pressure bases of the areas in which the gas reserves are located.
Reserves Included in This Report
In our opinion, the proved reserves presented in this report conform to the definition as set
forth in the Securities and Exchange Commissions Regulations Part 210.4-10(a). An abridged
version of the SEC reserves definitions from 210.4-10(a) entitled Petroleum Reserves Definitions
is included as an attachment to this report.
The various proved reserve status categories are defined under the attachment entitled
Petroleum Reserves Definitions in this report. The proved developed non-producing reserves
included herein consist of the shut-in and behind pipe categories.
Reserves are those estimated remaining quantities of petroleum that are anticipated to be
economically producible, as of a given date, from known accumulations under defined conditions.
All
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
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February 8, 2010
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reserve estimates involve an assessment of the uncertainty relating the likelihood that the
actual remaining quantities recovered will be greater or less than the estimated quantities
determined as of the date the estimate is made. The uncertainty depends chiefly on the amount of
reliable geologic and engineering data available at the time of the estimate and the interpretation
of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal
classifications, either proved or unproved. Unproved reserves are less certain to be recovered
than proved reserves and may be further sub-classified as probable and possible reserves to denote
progressively increasing uncertainty in their recoverability. At Apaches request, this report
addresses only the proved reserves attributable to the properties reviewed herein.
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
producible from a given date forward. The proved reserves included herein were estimated using
deterministic methods. If deterministic methods are used, the SEC has defined reasonable certainty
for proved reserves as a high degree of confidence that the quantities will be recovered.
Proved reserve estimates will generally be revised only as additional geologic or engineering
data become available or as economic conditions change. For proved reserves, the SEC states that
as changes due to increased availability of geoscience (geological, geophysical, and geochemical),
engineering, and economic data are made to the estimated ultimate recovery (EUR) with time,
reasonably certain EUR is much more likely to increase or remain constant than to decrease.
Moreover, estimates of proved reserves may be revised as a result of future operations, effects of
regulation by governmental agencies or geopolitical or economic risks. Therefore, the proved
reserves included in this report are estimates only and should not be construed as being exact
quantities, and if recovered, could be more or less than the estimated amounts.
Audit Data, Methodology, Procedure and Assumptions
The estimation of reserves involves two distinct determinations. The first determination
results in the estimation of the quantities of recoverable oil and gas and the second determination
results in the estimation of the uncertainty associated with those estimated quantities in
accordance with the definitions set forth by the Securities and Exchange Commissions Regulations
Part 210.4-10(a). The process of estimating the quantities of recoverable oil and gas reserves
relies on the use of certain generally accepted analytical procedures. These analytical procedures
fall into three broad categories or methods: (1) performance-based methods; (2) volumetric-based
methods; and (3) analogy. These methods may be used singularly or in combination by the reserve
evaluator in the process of estimating the quantities of reserves. Reserve evaluators must select
the method or combination of methods which in their professional judgment is most appropriate given
the nature and amount of reliable geoscience and engineering data available at the time of the
estimate, the established or anticipated performance characteristics of the reservoir being
evaluated and the stage of development or producing maturity of the property.
In many cases, the analysis of the available geoscience and engineering data and the
subsequent interpretation of this data may indicate a range of possible outcomes in an estimate,
irrespective of the method selected by the evaluator. When a range in the quantity of reserves is
identified, the evaluator must determine the uncertainty associated with the incremental quantities
of the reserves. If the reserve quantities are estimated using the deterministic incremental
approach, the uncertainty for each discrete incremental quantity of the reserves is addressed by
the reserve category assigned by the evaluator. Therefore, it is the categorization of reserve
quantities as proved, probable and/or possible that addresses the inherent uncertainty in the
estimated quantities reported. For
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
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February 8, 2010
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proved reserves, uncertainty is defined by the SEC as
reasonable certainty wherein the quantities actually recovered are much more likely than not to be
achieved. The SEC states that probable reserves are those additional reserves that are less
certain to be recovered than proved reserves but which, together with proved reserves, are as
likely as not to be recovered. The SEC states that possible reserves are those additional
reserves that are less certain to be recovered than probable reserves and the total quantities
ultimately recovered from a project have a low probability of exceeding proved plus probable plus
possible reserves. All quantities of reserves within the same reserve category must meet the SEC
definitions as noted above.
Estimates of reserves quantities and their associated reserve categories may be revised in the
future as additional geoscience or engineering data become available. Furthermore, estimates of
reserves quantities and their associated reserve categories may also be revised due to other
factors such as changes in economic conditions, results of future operations, effects of regulation
by governmental agencies or geopolitical or economic risks as previously noted herein.
The proved reserves for the properties that we reviewed were estimated by performance methods,
the volumetric method, analogy, or a combination of methods. Approximately 95 percent of the
proved producing reserves attributable to producing wells and/or reservoirs that we reviewed were
estimated by performance methods or a combination of methods. These performance methods include,
but may not be limited to, decline curve analysis, material balance and/or reservoir simulation
which utilized extrapolations of historical production and pressure data available through
November, 2009, in those cases where such data were considered to be definitive. The data utilized
in this analysis were furnished to Ryder Scott by Apache or obtained from public data sources and
were considered sufficient for the purpose thereof. Approximately 5 percent of the proved
producing reserves that we reviewed were estimated by the volumetric method, analogy, or a
combination of methods. These methods were used where there were inadequate historical performance
data to establish a definitive trend and where the use of production performance data as a basis
for the reserve estimates was considered to be inappropriate.
Approximately 100 percent of the proved non-producing and undeveloped reserves that we
reviewed were estimated by the volumetric method or analogy. The volumetric analysis utilized
pertinent well and seismic data supplied to Ryder Scott by Apache for our review or which we have
obtained from public data sources that were available through November, 2009. The data utilized
from the analogues as well as well and seismic data incorporated into the volumetric analysis were
considered sufficient for the purpose thereof.
To estimate economically recoverable proved oil and gas reserves , we consider many factors
and assumptions including, but not limited to, the use of reservoir parameters derived from
geological, geophysical and engineering data which cannot be measured directly, economic criteria
based on current costs and SEC pricing requirements, and forecasts of future production rates.
Under the SEC regulations 210.4-10(a)(22)(v) and (26), proved reserves must be anticipated to be
economically producible from a given date forward based on existing economic conditions including
the prices and costs at which economic producibility from a reservoir is to be determined. While
it may reasonably be anticipated that the future prices received for the sale of production and the
operating costs and other costs relating to such production may increase or decrease from those
under existing economic conditions, such changes were, in accordance with rules adopted by the SEC,
omitted from consideration in conducting this review.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
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February 8, 2010
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As stated previously, proved reserves must be anticipated to be economically producible from a
given date forward based on existing economic conditions including the prices and costs at which
economic producibility from a reservoir is to be determined. To confirm that the proved reserves
reviewed by us meet the SEC requirements to be economically producible, we have reviewed certain
primary economic data utilized by Apache relating to hydrocarbon prices and costs as noted herein.
The hydrocarbon prices furnished by Apache for the properties reviewed by us are based on SEC
price parameters using the average prices during the 12-month period prior to the ending date of
the period covered in this report, determined as the unweighted arithmetic averages of the prices
in effect on the first-day-of-the-month for each month within such period, unless prices were
defined by contractual arrangements. For hydrocarbon products sold under contract, the contract
prices, including fixed and determinable escalations exclusive of inflation adjustments, were used
until expiration of the contract. Upon contract expiration, the prices were adjusted to the
12-month unweighted arithmetic average as previously described.
The initial SEC hydrocarbon prices in effect on December 31, 2009 for the properties reviewed
by us were determined using the 12-month average first-day-of-the-month benchmark prices
appropriate to the geographic area where the hydrocarbons are sold. These benchmark prices are
prior to the adjustments for differentials as described herein. The table below summarizes the
benchmark prices and price reference used by Apache for the geographic areas reviewed by us.
In certain geographic areas, the price reference and benchmark prices may be defined by contractual
arrangements. In cases where there are numerous contracts or price references within the same
geographic area, the benchmark price is represented by the unweighted arithmetic average of the
initial 12-month average first-day-of-the-month benchmark prices used.
The product prices which were actually used by Apache to determine the future gross revenue
for each property reviewed by us reflect adjustments to the benchmark prices for gravity, quality,
local conditions, and/or distance from market, referred to herein as differentials. The
differentials used by Apache were accepted as factual data and reviewed by us for their
reasonableness; however, we have not conducted an independent verification of the data used by
Apache.
The table below summarizes Apaches net volume weighted benchmark prices adjusted for
differentials for the properties reviewed by us and referred to herein as Apaches average
realized prices. The average realized prices shown in the table below were determined from
Apaches estimate of the total future gross revenue before production taxes for the properties
reviewed by us and Apaches estimate of the total net reserves for the properties reviewed by us
for the geographic area. The data shown in the table below is presented in accordance with SEC
disclosure requirements for each of the geographic areas reviewed by us.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
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February 8, 2010
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Average | ||||||||||||||
Price | Benchmark | Average Realized | ||||||||||||
Geographic Area | Product | Reference | Prices | Prices | ||||||||||
North America |
||||||||||||||
United States |
Oil/Condensate | WTI Cushing | $61.14/Bbl | $57.07/Bbl | ||||||||||
NGLs | WTI Cushing | $61.14/Bbl | $31.54/Bbl | |||||||||||
Gas | Henry Hub | $3.87/MMBTU | $3.87/MCF | |||||||||||
Canada |
Oil/Condensate | WTI Cushing | $61.14/Bbl | $54.20/Bbl | ||||||||||
NGLs | WTI Cushing | $61.14/Bbl | $36.64/Bbl | |||||||||||
Gas | AECO | $3.08/MMBTU | $3.20/MCF | |||||||||||
Australia |
Oil/Condensate | Tapis | $63.70/Bbl | $59.93/Bbl | ||||||||||
Gas | Contracts | Contract | $3.48/MCF | |||||||||||
Egypt |
Oil/Condensate | Brent | $59.91/Bbl | $57.45/Bbl | ||||||||||
Gas | Contracts | Contract | $3.05/MCF | |||||||||||
Argentina |
Oil/Condensate | Govt. Regulated | $44.23/Bbl | $46.74/Bbl | ||||||||||
NGLs | Nqn LPG | $21.96/Bbl | $20.91/Bbl | |||||||||||
Gas | Contracts | Contract | $2.23/MCF | |||||||||||
United Kingdom |
Oil/Condensate | Brent | $59.91/Bbl | $59.91/Bbl |
The effects of derivative instruments designated as price hedges of oil and gas quantities are
not reflected in Apaches individual property evaluations.
Accumulated gas production imbalances, if any, were not taken into account in the proved gas
reserve estimates reviewed. The proved gas volumes included herein do not attribute gas consumed
in operations as reserves.
Operating costs furnished by Apache are based on the operating expense reports of Apache and
include only those costs directly applicable to the leases or wells for the properties reviewed by
us. The operating costs include a portion of general and administrative costs allocated directly to
the leases and wells. For operated properties, the operating costs include an appropriate level of
corporate general administrative and overhead costs. The operating costs for non-operated
properties include the COPAS overhead costs that are allocated directly to the leases and wells
under terms of operating agreements. Other costs include transportation and/or processing fees as
deductions. The operating costs furnished by Apache were accepted as factual data and reviewed by
us for their reasonableness; however, we have not conducted an independent verification of the data
used by Apache. No deduction was made for loan repayments, interest expenses, or exploration and
development prepayments that were not charged directly to the leases or wells.
Development costs furnished by Apache are based on authorizations for expenditure for the
proposed work or actual costs for similar projects. The development costs furnished by Apache were
accepted as factual data and reviewed by us for their reasonableness; however, we have not
conducted an independent verification of the data used by Apache. The estimated net cost of
abandonment after salvage was included by Apache for properties where abandonment costs net of
salvage were significant. Apaches estimates of the net abandonment costs were accepted without
independent verification.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
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February 8, 2010
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The proved non-producing and undeveloped reserves for the properties reviewed by us have been
incorporated herein in accordance with Apaches plans to develop these reserves as of December 31,
2009. The implementation of Apaches development plans as presented to us is subject to the
approval process adopted by Apaches management. As the result of our inquires during the course
of our review, Apache has informed us that the development activities for the properties reviewed
by us have been subjected to and received the internal approvals required by Apaches management at
the appropriate local, regional and/or corporate level. In addition to the internal approvals as
noted, certain development activities may still be subject to specific partner AFE processes, Joint
Operating Agreement (JOA) requirements or other administrative approvals external to Apache.
Additionally, Apache has informed us that they are not aware of any legal, regulatory, political or
economic obstacles that would significantly alter their plans.
Current costs used by Apache were held constant throughout the life of the properties.
Apaches forecasts of future production rates are based on historical performance from wells
currently on production. If no production decline trend has been established, future production
rates were held constant, or adjusted for the effects of curtailment where appropriate, until a
decline in ability to produce was anticipated. An estimated rate of decline was then applied to
depletion of the reserves. If a decline trend has been established, this trend was used as the
basis for estimating future production rates.
Test data and other related information were used to estimate the anticipated initial
production rates for those wells or locations that are not currently producing. For reserves not
yet on production, sales were estimated to commence at an anticipated date furnished by Apache.
Wells or locations that are not currently producing may start producing earlier or later than
anticipated in Apaches estimates due to unforeseen factors causing a change in the timing to
initiate production. Such factors may include delays due to weather, the availability of rigs, the
sequence of drilling, completing and/or recompleting wells and/or constraints set by regulatory
bodies.
The future production rates from wells currently on production or wells or locations that are
not currently producing may be more or less than estimated because of changes including, but not
limited to, reservoir performance, operating conditions related to surface facilities, compression
and artificial lift, pipeline capacity and/or operating conditions, producing market demand and/or
allowables or other constraints set by regulatory bodies.
The proved reserves reported herein are limited to the period prior to expiration of current
contracts providing the legal right to produce or a revenue interest in such production unless
evidence indicates that contract renewal is reasonably certain. Furthermore, properties in the
different countries may be subjected to significantly varying contractual fiscal terms that affect
the net revenue to Apache for the production of these volumes. The prices and economic return
received for these net volumes can vary significantly based on the terms of these contracts.
Therefore, when applicable, Ryder Scott reviewed the fiscal terms of such contracts and discussed
with Apache the net economic benefit attributed to such operations for the determination of the net
hydrocarbon volumes and income thereof. Ryder Scott has not conducted an exhaustive audit or
verification of such contractual information. Neither our review of such contractual information
nor our acceptance of Apaches representations regarding such contractual information should be
construed as a legal opinion on this matter.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
Page 9
February 8, 2010
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Ryder Scott did not evaluate the country and geopolitical risks in the countries where Apache
operates or has interests. Apaches operations may be subject to various levels of governmental
controls and regulations. These controls and regulations may include, but may not be limited to,
matters relating to land tenure and leasing, the legal rights to produce hydrocarbons including the
granting, extension or termination of production sharing contracts, the fiscal terms of various
production sharing contracts, drilling and production practices, environmental protection,
marketing and pricing policies, royalties, various taxes and levies including income tax, and
foreign trade and investment and are subject to change from time to time. Such changes in
governmental regulations and policies may cause volumes of proved reserves actually recovered and amounts of proved income actually
received to differ significantly from the estimated quantities.
The estimates of proved reserves presented herein were based upon a detailed study of the
properties in which Apache owns an interest; however, we have not made any field examination of the
properties. No consideration was given in this report to potential environmental liabilities that
may exist nor were any costs included for potential liabilities to restore and clean up damages, if
any, caused by past operating practices.
Certain technical personnel of Apache are responsible for the preparation of reserve estimates
on new properties and for the preparation of revised estimates, when necessary, on old properties.
These personnel assembled the necessary data and maintained the data and workpapers in an orderly
manner. We consulted with these technical personnel and had access to their workpapers and
supporting data in the course of our audit.
Apache has informed us that they have furnished us all of the material accounts, records,
geological and engineering data, and reports and other data required for this investigation. In
performing our audit of Apaches forecast of future proved production, we have relied upon data
furnished by Apache with respect to property interests owned, production and well tests from
examined wells, normal direct costs of operating the wells or leases, other costs such as
transportation and/or processing fees, ad valorem and production taxes, recompletion and
development costs, abandonment costs after salvage, product prices based on the SEC regulations,
adjustments or differentials to product prices, geological structural and isochore maps, well logs,
core analyses, and pressure measurements. Ryder Scott reviewed such factual data for its
reasonableness; however, we have not conducted an independent verification of the data supplied by
Apache. We consider the factual data furnished to us by Apache to be appropriate and sufficient
for the purpose of our review of Apaches estimates of reserves. In summary, we consider the
assumptions, data, methods and analytical procedures used by Apache and as reviewed by us
appropriate for the purpose hereof, and we have used all such methods and procedures that we
consider necessary and appropriate under the circumstances to render the conclusions set forth
herein.
Audit Opinion
Based on our review, including the data, technical processes and interpretations presented by
Apache, it is our opinion that the overall procedures and methodologies utilized by Apache in
preparing their estimates of the proved reserves as of December 31, 2009 comply with the current
SEC regulations and that the overall proved reserves for the reviewed properties as estimated by
Apache are, in the aggregate, reasonable within the established audit tolerance guidelines of 10
percent as set forth in the SPE auditing standards.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
Page 10
February 8, 2010
Page 10
In general, we were in reasonable agreement with Apaches estimates of proved reserves for the
properties which we reviewed. As a consequence, it is our opinion that the data presented herein
for the properties that we reviewed fairly reflect the estimated net reserves owned by Apache.
Other Properties
Other properties, as used herein, are those properties of Apache which we did not review. The
proved net reserves attributable to the other properties represent 21.0 percent of the total proved
discounted future net income at 10 percent based on the unescalated pricing policy of the SEC as
taken from reserve and income projections prepared by Apache as of December 31, 2009
The same technical personnel of Apache were responsible for the preparation of the reserve
estimates for the properties that we reviewed as well as for the properties not reviewed by Ryder
Scott.
Standards of Independence and Professional Qualification
Ryder Scott is an independent petroleum engineering consulting firm that has been providing
petroleum consulting services throughout the world for over seventy years. Ryder Scott is
employee-owned and maintains offices in Houston, Texas; Denver, Colorado; and Calgary, Alberta,
Canada. We have over eighty engineers and geoscientists on our permanent staff. By virtue of the
size of our firm and the large number of clients for which we provide services, no single client or
job represents a material portion of our annual revenue. We do not serve as officers or directors
of any publicly traded oil and gas company and are separate and independent from the operating and
investment decision-making process of our clients. This allows us to bring the highest level of
independence and objectivity to each engagement for our services.
Ryder Scott actively participates in industry-related professional societies and organizes an
annual public forum focused on the subject of reserves evaluations and SEC regulations. Many of
our staff have authored or co-authored technical papers on the subject of reserves related topics.
We encourage our staff to maintain and enhance their professional skills by actively participating
in ongoing continuing education.
Prior to becoming an officer of the Company, Ryder Scott requires that staff engineers and
geoscientists have received professional accreditation in the form of a registered or certified
professional engineers license or a registered or certified professional geoscientists license,
or the equivalent thereof, from an appropriate governmental authority or a recognized
self-regulating professional organization.
We are independent petroleum engineers with respect to Apache. Neither we nor any of our
employees have any interest in the subject properties, and neither the employment to do this work
nor the compensation is contingent on our estimates of reserves for the properties which were
reviewed.
The results of this audit, presented herein, are based on technical analysis conducted by
teams of geoscientists and engineers from Ryder Scott. The professional qualifications of the
undersigned, the technical person primarily responsible for overseeing, reviewing and approving the
review of the reserves information discussed in this report, are included as an attachment to this
letter.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Apache Corporation
February 8, 2010
Page 11
February 8, 2010
Page 11
Terms of Usage
The results of our third party audit, presented in report form herein, were prepared in
accordance with the disclosure requirements set forth in the SEC regulations and intended for
public disclosure as an exhibit in filings made with the SEC by Apache.
Apache makes periodic filings on Form 10-K with the SEC under the 1934 Exchange Act.
Furthermore, Apache has certain registration statements filed with the SEC under the 1933
Securities Act into which any subsequently filed Form 10-K is incorporated by reference. We have
consented to the incorporation by reference in the registration statements on Form S-3, Form S-4,
and Form S-8 of Apache of the references to our name as well as to the references to our third
party report for Apache, which appears in the December 31, 2009 annual report on Form 10-K of
Apache. Our written consent for such use is included as a separate exhibit to the filings made
with the SEC by Apache.
We have provided Apache with a digital version of the original signed copy of this report
letter. In the event there are any differences between the digital version included in filings
made by Apache and the original signed report letter, the original signed report letter shall
control and supersede the digital version.
The data and work papers used in the preparation of this report are available for examination
by authorized parties in our offices. Please contact us if we can be of further service.
Very truly yours, RYDER SCOTT COMPANY, L.P. TBPE Firm Registration No. F-1580 \s\ Jennifer A. Fitzgerald Jennifer A. Fitzgerald, P.E. TBPE License No. 100572 Senior Petroleum Engineer |
[SEAL] |
|||
\s\ Michael F. Stell Michael F. Stell, P.E. TBPE License No. 56416 Managing Senior Vice President |
[SEAL] |
|||
JAF/sm
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
Professional Qualifications of Primary Technical Person
The conclusions presented in this report are the result of technical analysis conducted by teams of
geoscientists and engineers from Ryder Scott Company, L.P. Mr. Michael F. Stell was the primary
technical person responsible for overseeing the estimate of the reserves, future production and
income.
Mr. Stell, an employee of Ryder Scott Company L.P. (Ryder Scott) since 1992, is a Managing Senior
Vice President and also serves as an Engineering Group Leader responsible for coordinating and
supervising staff and consulting engineers of the company in ongoing reservoir evaluation studies
worldwide. Before joining Ryder Scott, Mr. Stell served in a number of engineering positions with
Shell Oil Company and Landmark Concurrent Solutions. For more information regarding Mr. Stells
geographic and job specific experience, please refer to the Ryder Scott Company website at
http://www.ryderscott.com/Experience/Employees.php.
Mr. Stell earned a Bachelor of Science degree in Chemical Engineering from Purdue University in
1979 and a Master of Science Degree in Chemical Engineering from the University of California,
Berkeley, in 1981. He is a registered Professional Engineer in the State of Texas. He is also a
member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers.
In addition to gaining experience and competency through prior work experience, the Texas Board of
Professional Engineers requires a minimum of 15 hours of continuing education annually, including
at least one hour in the area of professional ethics, which Mr. Stell fulfills. As part of his
2009 continuing education hours, Mr. Stell attended an internally presented 13 hours of formalized
training as well as a day-long public forum relating to the definitions and disclosure guidelines
contained in the United States Securities and Exchange Commission Title 17, Code of Federal
Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the
Federal Register. Mr. Stell attended an additional 15 hours of formalized in-house training as
well as an additional five hours of formalized external training during 2009 covering such topics
as the SPE/WPC/AAPG/SPEE Petroleum Resources Management System, reservoir engineering, geoscience
and petroleum economics evaluation methods, procedures and software and ethics for consultants.
Based on his educational background, professional training and almost 30 years of practical
experience in the estimation and evaluation of petroleum reserves, Mr. Stell has attained the
professional qualifications for a Reserves Estimator and Reserves Auditor set forth in Article III
of the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information
promulgated by the Society of Petroleum Engineers as of February 19, 2007.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
PETROLEUM RESERVES DEFINITIONS
As Adapted From:
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
PREAMBLE
On January 14, 2009, the United States Securities and Exchange Commission (SEC) published the
Modernization of Oil and Gas Reporting; Final Rule in the Federal Register of National Archives
and Records Administration (NARA). The Modernization of Oil and Gas Reporting; Final Rule
includes revisions and additions to the definition section in Rule 4-10 of Regulation S-X,
revisions and additions to the oil and gas reporting requirements in Regulation S-K, and amends and
codifies Industry Guide 2 in Regulation S-K. The Modernization of Oil and Gas Reporting; Final
Rule, including all references to Regulation S-X and Regulation S-K, shall be referred to herein
collectively as the SEC Regulations. The SEC Regulations take effect for all filings made with
the United States Securities and Exchange Commission as of December 31, 2009, or after January 1,
2010. Reference should be made to the full text under Title 17, Code of Federal Regulations,
Regulation S-X Part 210, Rule 4-10(a) for the complete definitions, as the following definitions,
descriptions and explanations rely wholly or in part on excerpts from the original document (direct
passages excerpted from the aforementioned SEC document are denoted in italics herein).
Reserves are those estimated remaining quantities of petroleum which are anticipated to be
economically producible, as of a given date, from known accumulations under defined conditions.
All reserve estimates involve some degree of uncertainty. The uncertainty depends chiefly on the
amount of reliable geologic and engineering data available at the time of the estimate and the
interpretation of these data. The relative degree of uncertainty may be conveyed by placing
reserves into one of two principal classifications, either proved or unproved. Unproved reserves
are less certain to be recovered than proved reserves and may be further sub-classified as probable
and possible reserves to denote progressively increasing uncertainty in their recoverability.
Under the SEC Regulations as of December 31, 2009, or after January 1, 2010, a company may
optionally disclose estimated quantities of probable or possible oil and gas reserves in documents
publicly filed with the Commission. The SEC Regulations continue to prohibit disclosure of
estimates of oil and gas resources other than reserves and any estimated values of such resources
in any document publicly filed with the Commission unless such information is required to be
disclosed in the document by foreign or state law as noted in §229.1202 Instruction to Item 1202.
Reserves estimates will generally be revised as additional geologic or engineering data become
available or as economic conditions change.
Reserves may be attributed to either natural energy or improved recovery methods. Improved
recovery methods include all methods for supplementing natural energy or altering natural forces in
the reservoir to increase ultimate recovery. Examples of such methods are pressure maintenance,
natural gas cycling, waterflooding, thermal methods, chemical flooding, and the use of miscible and
immiscible displacement fluids. Other improved recovery methods may be developed in the future as
petroleum technology continues to evolve.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
PETROLEUM RESERVES DEFINITIONS
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Reserves may be attributed to either conventional or unconventional petroleum accumulations.
Petroleum accumulations are considered as either conventional or unconventional based on the nature
of their in-place characteristics, extraction method applied, or degree of processing prior to
sale. Examples of unconventional petroleum accumulations include coalbed or coalseam methane
(CBM/CSM), basin-centered gas, shale gas, gas hydrates, natural bitumen and oil shale deposits.
These unconventional accumulations may require specialized extraction technology and/or significant
processing prior to sale.
Reserves do not include quantities of petroleum being held in inventory.
Because of the differences in uncertainty, caution should be exercised when aggregating
quantities of petroleum from different reserves categories.
RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §210.4-10(a)(26) defines reserves as
follows:
Reserves. Reserves are estimated remaining quantities of oil and gas and related substances
anticipated to be economically producible, as of a given date, by application of development
projects to known accumulations. In addition, there must exist, or there must be a reasonable
expectation that there will exist, the legal right to produce or a revenue interest in the
production, installed means of delivering oil and gas or related substances to market, and all
permits and financing required to implement the project.
Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated
by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as
economically producible. Reserves should not be assigned to areas that are clearly separated from
a known accumulation by a non-productive reservoir (i.e., absence of reservoir,
structurally low reservoir, or negative test results). Such areas may contain prospective
resources (i.e., potentially recoverable resources from undiscovered accumulations).
PROVED RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §210.4-10(a)(22) defines proved oil and gas
reserves as follows:
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
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
PETROLEUM RESERVES DEFINITIONS
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(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.
PROVED RESERVES (SEC DEFINITIONS) CONTINUED
(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:
(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.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
RESERVES STATUS DEFINITIONS AND GUIDELINES
As Adapted From:
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
RULE 4-10(a) of REGULATION S-X PART 210
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)
and
PETROLEUM RESOURCES MANAGEMENT SYSTEM (SPE-PRMS)
Sponsored and Approved by:
SOCIETY OF PETROLEUM ENGINEERS (SPE),
WORLD PETROLEUM COUNCIL (WPC)
AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS (AAPG)
SOCIETY OF PETROLEUM EVALUATION ENGINEERS (SPEE)
Reserves status categories define the development and producing status of wells and
reservoirs. Reference should be made to Title 17, Code of Federal Regulations, Regulation S-X Part
210, Rule 4-10(a) and the SPE-PRMS as the following reserves status definitions are based on
excerpts from the original documents (direct passages excerpted from the aforementioned SEC and
SPE-PRMS documents are denoted in italics herein).
DEVELOPED RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §210.4-10(a)(6) defines developed oil and
gas reserves as follows:
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.
Developed Producing (SPE-PRMS Definitions)
While not a requirement for disclosure under the SEC regulations, developed oil and gas
reserves may be further sub-classified according to the guidance contained in the SPE-PRMS as
Producing or Non-Producing.
Developed Producing Reserves
Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate.
Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate.
Improved recovery reserves are considered producing only after the improved recovery project
is in operation.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS
RESERVES STATUS DEFINITIONS AND GUIDELINES
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Developed Non-Producing
Developed Non-Producing Reserves include shut-in and behind-pipe reserves.
Developed Non-Producing Reserves include shut-in and behind-pipe reserves.
Shut-In
Shut-in Reserves are expected to be recovered from:
Shut-in Reserves are expected to be recovered from:
(1) | completion intervals which are open at the time of the estimate but which have not yet started producing; | ||
(2) | wells which were shut-in for market conditions or pipeline connections; or | ||
(3) | wells not capable of production for mechanical reasons. |
Behind-Pipe
Behind-pipe Reserves are expected to be recovered from zones in existing wells which will require additional completion work or future re-completion prior to start of production.
Behind-pipe Reserves are expected to be recovered from zones in existing wells which will require additional completion work or future re-completion prior to start of production.
In all cases, production can be initiated or restored with relatively low expenditure
compared to the cost of drilling a new well.
UNDEVELOPED RESERVES (SEC DEFINITIONS)
Securities and Exchange Commission Regulation S-X §210.4-10(a)(31) defines undeveloped oil and
gas reserves as follows:
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 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
paragraph (a)(2) of this section, or by other evidence using reliable technology
establishing reasonable certainty.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS