Attached files

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10-K - FORM 10-K - Evolve Transition Infrastructure LPd10k.htm
EX-32.1 - CERTIFICATION OF CEO SECTION 906 - Evolve Transition Infrastructure LPdex321.htm
EX-31.2 - CERTIFICATION OF CFO SECTION 302 - Evolve Transition Infrastructure LPdex312.htm
EX-32.2 - CERTIFICATION OF CFO SECTION 906 - Evolve Transition Infrastructure LPdex322.htm
EX-12.1 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - Evolve Transition Infrastructure LPdex121.htm
EX-21.1 - LIST OF SUBSIDIARIES OF CONSTELLATION ENERGY PARTNERS LLC - Evolve Transition Infrastructure LPdex211.htm
EX-23.1 - CONSENT OF PRICEWATERHOUSECOOPERS LLP - Evolve Transition Infrastructure LPdex231.htm
EX-31.1 - CERTIFICATION OF CEO SECTION 302 - Evolve Transition Infrastructure LPdex311.htm
EX-23.2 - CONSENT OF NETHERLAND, SEWELL & ASSOCIATES, INC - Evolve Transition Infrastructure LPdex232.htm

Exhibit 99.1

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February 14, 2011

Mr. Richard A. Miller

Constellation Energy Partners LLC

1801 Main Street, Suite 1300

Houston, Texas 77002

Dear Mr. Miller:

In accordance with your request, we have estimated the proved reserves and future revenue, as of December 31, 2010, to the Constellation Energy Partners LLC (Constellation) interest in certain oil and gas properties located in Alabama, Kansas, Nebraska, and Oklahoma. We completed our evaluation on February 14, 2011. It is our understanding that the proved reserves estimated in this report constitute all of the proved reserves owned by Constellation. The estimates in this report have been prepared in accordance with the definitions and guidelines of the U.S. Securities and Exchange Commission (SEC) and, with the exception of the exclusion of future income taxes, conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas. Definitions are presented immediately following this letter. This report has been prepared for Constellation’s use in filing with the SEC; in our opinion the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for such purpose.

We estimate the net reserves and future net revenue to the Constellation interest in these properties, as of December 31, 2010, to be:

 

     Net Reserves      Future Net Revenue ($)  

Category

   Oil
(Barrels)
     Gas (MCF)      Total      Present Worth
at 10%
 

Proved Developed Producing

     443,284         103,074,289         219,822,400         121,932,500   

Proved Developed Non-Producing

     12,861         21,815,955         21,228,600         10,368,800   

Proved Undeveloped(1)

     48,493         41,089,305         28,927,700         (614,800
                                   

Total Proved

     504,638         165,979,547         269,978,800         131,686,400   

Totals may not add because of rounding.

 

  (1)

Estimates of proved undeveloped reserves have been included for certain locations that generate positive future net revenue but have negative present worth discounted at 10 percent based on the constant prices and costs discussed in subsequent paragraphs of this letter.

The oil reserves shown include crude oil and condensate. Oil volumes are expressed in barrels that are equivalent to 42 United States gallons. Gas volumes are expressed in thousands of cubic feet (MCF) at standard temperature and pressure bases.

The estimates shown in this report are for proved reserves. As requested, probable and possible reserves that exist for these properties have not been included. Estimates of proved undeveloped reserves have been included for certain locations that generate positive future net revenue but have negative present worth discounted at 10 percent based on the constant prices and costs discussed in subsequent paragraphs of this letter. These locations have been included based on the operators’ declared intent to drill these wells, as evidenced by Constellation’s internal budget, reserves estimates, and price forecast. 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. Reserves categorization conveys the relative degree of certainty; reserves

 

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subcategorization is based on development and production status. The estimates of reserves and future revenue included herein have not been adjusted for risk.

Future gross revenue to the Constellation interest is prior to deducting state production taxes and ad valorem taxes. Future net revenue is after deductions for these taxes, future capital costs, and operating expenses but before consideration of any income taxes. The future net revenue has been discounted at an annual rate of 10 percent to determine its present worth, which is shown to indicate the effect of time on the value of money. Future net revenue presented in this report, whether discounted or undiscounted, should not be construed as being the fair market value of the properties.

For the purposes of this report, we did not perform any field inspection of the properties, nor did we examine the mechanical operation or condition of the wells and facilities. We have not investigated possible environmental liability related to the properties; therefore, our estimates do not include any costs due to such possible liability. Also, our estimates do not include any salvage value for the lease and well equipment or the cost of abandoning the properties.

Prices used in this report are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2010. For oil volumes, the average regional posted or spot prices are adjusted by lease for quality, transportation fees, and local price differentials. For gas volumes, the average regional spot prices are adjusted by property group for energy content, transportation fees, and local price differentials. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the properties are $75.57 per barrel of oil and $4.250 per MCF of gas. Average index prices along with the average realized prices for each property group are shown in the following table:

 

    

Oil

    

Gas

 

Property Group

  

Pricing

Index

   Average
Posted/Spot
Price

($/Barrel)
     Average
Realized
Price

($/Barrel)
    

Pricing

Index

   Average
Spot

Price
($/MMBTU)
     Average
Realized
Price

($/MCF)
 

Cherokee Basin

   West Texas Intermediate      75.96         76.79       Oneok Oklahoma      4.144         3.983   

CEP Cola

   N/A      —           —         CenterPoint East      4.162         4.224   

Robinson’s Bend

   N/A      —           —         Southern Natural Louisiana      4.367         4.554   

St. Anselm

   West Texas Intermediate (Cushing)      79.43         72.21       N/A      —           —     

Lease and well operating costs used in this report are based on operating expense records of Constellation. These costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels. Headquarters general and administrative overhead expenses of Constellation are included to the extent that they are covered under joint operating agreements for the operated properties. Lease and well operating costs are held constant throughout the lives of the properties. Capital costs are included as required for workovers, new development wells, and production equipment. The future capital costs are held constant to the date of expenditure.

We have made no investigation of potential gas volume and value imbalances resulting from overdelivery or underdelivery to the Constellation interest. Therefore, our estimates of reserves and future revenue do not include adjustments for the settlement of any such imbalances; our projections are based on Constellation receiving its net revenue interest share of estimated future gross gas production.

The reserves shown in this report are estimates only and should not be construed as exact quantities. Proved reserves are those quantities of oil and gas which, by analysis of engineering and geoscience data, can be estimated with reasonable certainty to be economically producible. Estimates of reserves may increase or decrease as a result of market conditions, future operations, changes in regulations, or actual reservoir performance. In addition to the primary economic assumptions discussed herein, our estimates are based on

 


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certain assumptions including, but not limited to, that the properties will be developed consistent with current development plans, that the properties will be operated in a prudent manner, that no governmental regulations or controls will be put in place that would impact the ability of Constellation to recover the reserves, and that our projections of future production will prove consistent with actual performance. If the reserves are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing this report.

For the purposes of this report, we used technical and economic data including, but not limited to, well logs, geologic maps, well test data, production data, historical price and cost information, and property ownership interests. The reserves in this report have been estimated using deterministic methods; these estimates have been prepared in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE Standards). We used standard engineering and geoscience methods, or a combination of methods, including performance analysis, volumetric analysis, and analogy, that we considered to be appropriate and necessary to categorize and estimate reserves in accordance with SEC definitions and guidelines. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geoscience data; therefore, our conclusions necessarily represent only informed professional judgment.

The data used in our estimates were obtained from Constellation, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc. (NSAI) and were accepted as accurate. Supporting geoscience, performance, and work data are on file in our office. The titles to the properties have not been examined by NSAI, nor has the actual degree or type of interest owned been independently confirmed. The technical persons responsible for preparing the estimates presented herein meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the SPE Standards. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties nor are we employed on a contingent basis.

 

   

Sincerely,

 

NETHERLAND, SEWELL & ASSOCIATES, INC.

Texas Registered Engineering Firm F-002699

    By:   /s/ C.H. (Scott) Rees III
       

C.H. (Scott) Rees III, P.E.

Chairman and Chief Executive Officer

     
By:   /s/Richard B. Talley, Jr.     By:   /s/ David E. Nice
 

Richard B. Talley, Jr., P.E. 102425

Vice President

     

David E. Nice, P.G. 346

Vice President

Date Signed: February 14, 2011     Date Signed: February 14, 2011

RBT:EBL

 

 

Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates, Inc. (NSAI) as a convenience to our clients. The digital document is intended to be substantively the same as the original signed document maintained by NSAI. The digital document is subject to the parameters, limitations, and conditions stated in the original document. In the event of any differences between the digital document and the original document, the original document shall control and supersede the digital document.