Attached files
file | filename |
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10-K - FORM 10-K - PERMIAN BASIN ROYALTY TRUST | d80047e10vk.htm |
EX-23.1 - EX-23.1 - PERMIAN BASIN ROYALTY TRUST | d80047exv23w1.htm |
EX-32.1 - EX-32.1 - PERMIAN BASIN ROYALTY TRUST | d80047exv32w1.htm |
EX-31.1 - EX-31.1 - PERMIAN BASIN ROYALTY TRUST | d80047exv31w1.htm |
Exhibit 99.1
February 17, 2011
Mr. Ron Hooper
Permian Basin Royalty Trust
901 Main Street, 17th Floor
Dallas, Texas 75020-3714
Permian Basin Royalty Trust
901 Main Street, 17th Floor
Dallas, Texas 75020-3714
Re: | Evaluation Summary | |||
Permian Basin Royalty Trust Interests | ||||
Proved Reserves | ||||
As of December 31, 2010 | ||||
Pursuant to the Rules and Regulations of the Securities and Exchange Commission for Reporting Corporate Reserves and Future Net Revenue |
Dear Mr. Hooper:
As requested, we are submitting this report of the estimates of proved reserves and economics
forecasts attributable to the Permian Basin Royalty Trust interests effective as of December 31,
2010, completed this day February 17, 2011 for the purpose of reporting corporate reserves and
future net revenue. This report has been prepared pursuant to the rules, regulations and
guidelines of the Securities and Exchange Commission, Item 1202 (a) (8) of Regulation S-K, for
reporting corporate reserves and future net revenue. The proved reserves estimated in this report
constitute 100 percent of the proved reserves owned by the Permian Basin Royalty Trust, all of
which are located in the United States.
Composite reserve estimates and economic forecasts for the proved reserves are summarized
below:
Total | ||||||||||||||||||||||||
Proved | ||||||||||||||||||||||||
Total Proved | Developed | |||||||||||||||||||||||
Total Proved | Total Proved Developed | Total Proved Undeveloped | Developed Producing | Non-producing | ||||||||||||||||||||
Net Reserves |
||||||||||||||||||||||||
Oil/Condensate |
- Mbbl | 6,178 | 6,160 | 18 | 5,839 | 321 | ||||||||||||||||||
Gas |
- MMcf | 22,460 | 22,422 | 38 | 21,601 | 821 | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Oil/Condensate |
- M$ | 463,897 | 462,566 | 1,331 | 438,511 | 24,055 | ||||||||||||||||||
Gas |
- M$ | 159,521 | 159,277 | 244 | 153,914 | 5,363 | ||||||||||||||||||
Severance Taxes |
- M$ | 25,545 | 25,481 | 64 | 24,275 | 1,206 | ||||||||||||||||||
Operating Income
(BFIT) |
- M$ | 597,873 | 596,362 | 1,511 | 568,150 | 28,212 | ||||||||||||||||||
Discounted at 10% |
- M$ | 324,326 | 323,649 | 677 | 311,606 | 12,043 |
Mr. Ron Hooper
Permian Basin Royalty Trust Interests
February 17, 2011
Page 2
Permian Basin Royalty Trust Interests
February 17, 2011
Page 2
In accordance with the Securities and Exchange Commission guidelines, the future net cash
flow, operating income (BFIT), has been discounted at an annual rate of 10% to determine its
present worth. The discounted value, present worth, is indicative of the time value of money.
The discounted value, present worth, shown above should not be construed to represent an
estimate of the fair market value by Cawley, Gillespie & Associates, Inc.
The Permian Basin Royalty Trust consists of the Waddell Ranch Properties located in Crane
County, Texas, and the Texas Royalty Properties located in various counties in Texas. Detailed
forecasts of reserves and economics are presented in this report for the Permian Basin Royalty
Trust interests. For the Waddell Properties, the forecasts are organized into six major field
sections and three minor field sections. Within the Waddell Ranch section of the report, Tables I,
II, III, IV and V report total proved, proved developed, proved developed producing, proved
developed non-producing, and proved undeveloped reserves, respectively, for the Waddell Ranch
Properties. Total proved reserves and economic forecasts for each of the six major fields are
listed in the tables labeled I field name. Following these tables are Tables II field
name which present summaries of pertinent data including estimates of ultimate recovery, gross and
net reserves, ownership, revenue, expenses, net income and discounted cash flow for the individual
properties. The minor fields reserves follow the six major fields and are grouped according to
reserve classification. The reserve groups include proved developed producing, proved developed
non-producing and proved undeveloped with composite tables labeled Table I PDP Minor, Table I
PDNP Minor and Table I PUD Minor, respectively. Lease summaries for the three categories are
found in Tables II PDP Minor, II PDNP Minor and II PUD Minor. For the Texas Royalty
Properties, Table I is a composite forecast of proved developed producing reserves. Table II is a
summary of proved developed producing reserves showing estimates of ultimate recovery, gross and
net reserves, ownership, revenue, expenses, net income and discounted cash flow for the individual
properties. Table II groups royalty entities together primarily by county then by field.
Individual lease forecasts are presented in the Arabic numbered tables following the Tables II in
each section. Page 1 of Appendix II explains the type of data in these tables.
The Trust has instructed Cawley, Gillespie & Associates, Inc. as to the method by which
reserves and net revenue should be allocated to the Permian Basin Royalty Trust Interests in
preparing reserve reports and economic forecasts for the Waddell Ranch Properties and the Texas
Royalty Properties. A thorough explanation of the allocation formula is included in Appendix I.
As to the assumptions, methods and procedures used in connection with the preparation of this
report, prices were forecast in accordance with Securities and Exchange Commission rules and
guidelines. The prices are determined as an unweighted arithmetic average of the
first-day-of-the-month benchmark price for each month of 2010. The 12-month average benchmark
Henry Hub spot gas price of $4.37 per MMBtu and 12-month average benchmark WTI Cushing spot oil
price of $79.43 per barrel (source: Wall Street Journal) were used. The oil and gas prices were
held constant throughout the life of the properties. The prices were adjusted for gravity,
quality, heating value, shrinkage, transportation and marketing. For the Texas Royalty Properties,
the gas and oil prices were adjusted using a +$4.467 per MCF and a -$4.26 per barrel differential,
respectively. For the Waddell Ranch Properties, the gas and oil prices were adjusted using a
+$2.161 per MCF and a -$4.43 per barrel differential, respectively. For the Texas Royalty
Properties, the resulting oil and gas prices are $75.17 per barrel and $8.837 per MCF respectively.
For the Waddell Ranch Properties, the resulting oil and gas prices are $75.00 per barrel, and
$6.531 per MCF, respectively.
Mr. Ron Hooper
Permian Basin Royalty Trust Interests
February 17, 2011
Page 3
Permian Basin Royalty Trust Interests
February 17, 2011
Page 3
For the Waddell Ranch Properties, operating expenses and capital costs were based on an
analysis of data provided by Schlumberger IPM and ConocoPhillips (on behalf of Burlington
Resources Oil & Gas Company LP). Operating expenses include direct lease operating expenses
and administrative overhead. The operating expenses range from $1735 per well per month to $6721
per well per month. Investments include drilling costs, work-over costs and production equipment
costs. No operating expense or capital cost data is available for the Texas Royalty Properties
since they are purely a royalty interest only. Based on an analysis of the Permian Basin Royalty
Trust Monthly reports, severance taxes were forecast as 3.9% and 5.0% of oil and gas revenue,
respectively, for the Waddell Ranch Properties. For the Texas Royalty Properties, severance taxes
were forecast as 3.47% and 6.04% of oil and gas revenue, respectively. The ad valorem taxes were
forecast as 3.95% and 5.21% for the Waddell Ranch Properties and the Texas Royalty Properties,
respectively. Neither expenses nor investments were escalated. The cost of plugging and the
salvage value of equipment have not been considered.
The reserves were estimated using the production performance, volumetric or analogy methods,
or a combination of these methods. In each case, we used the method or combination of methods that
we considered appropriate and necessary to establish the reserves and conclusions presented.
Riverhill Energy Corporation supplied the royalty production data for the Texas Royalty Properties.
For these properties, the proved producing reserves are forecast using the production performance,
decline analysis method to an estimated final production rate equal to approximately one-tenth of
the current production rate. The producing reserves for the Waddell Ranch Properties were
estimated using the production performance or analogy methods or a combination of these methods.
The non-producing reserves were estimated using the analogy or volumetric methods or a combination
of these methods.
The reserve classifications conform to the definitions and criteria of the Securities and
Exchange Commission. The reserves and economics are predicated on the regulatory agency
classifications, rules, policies, laws, taxes and royalties in effect on the effective date except
as noted herein. The possible effects of changes in legislation or other Federal or State
restrictive actions which could affect the reserves and economics have not been considered. We are
not aware of any legislative changes or restrictive actions that may possibly impact the reserves
or economics as presented. Possible environmental liability related to the properties has not been
investigated nor considered. The assumptions, data, methods and procedures as described are
appropriate for the purpose of this report. All reserve estimates represent our best judgment
based on data available at the time of preparation and assumptions as to future economic and
regulatory conditions. Due to the inherent uncertainties of reserves estimates, future production
rates, commodity prices, costs and expenses, it should be realized that the reserves actually
recovered, the revenue received and the actual cost incurred could be more or less than the
estimated amounts.
The reserve estimates were based on interpretations of factual data furnished by
ConocoPhillips, Schlumberger IPM, Riverhill Energy Corporation and the Permian Basin Royalty Trust.
Liquid and gas price information, cost and expense history, subject wells and ownership were
supplied by one or more of the above and were accepted as furnished. To some extent, information
from public records has been used to check and/or supplement these data. The basic engineering and
geological data were utilized subject to third party reservations and qualifications. Nothing has
come to our attention, however, that would cause us to believe that we are not justified
in relying on such data. An on-site inspection of these properties has not been made nor have
the wells been tested by Cawley, Gillespie & Associates, Inc. We have used all methods and
procedures that we consider necessary under the circumstances to prepare this report.
Mr. Ron Hooper
Permian Basin Royalty Trust Interests
February 17, 2011
Page 4
Permian Basin Royalty Trust Interests
February 17, 2011
Page 4
Cawley, Gillespie & Associates, Inc. is independent with respect to the Permian Basin Royalty
Trust as provided in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve
Information promulgated by the Society of Petroleum Engineers. Neither Cawley, Gillespie &
Associates, Inc. nor any of its employees has any interest in the subject properties. Neither the
employment to make this study nor the compensation is contingent on the results of our work or the
future performance of the subject properties. Cawley, Gillespie and Associates, Inc. is a Texas
registered engineering firm, F-693, of professional engineers and geologists serving the oil and
gas industry for over fifty years. This report was prepared by, or under the supervision of,
Kenneth J. Mueller, a Texas licensed professional engineer, 86132.
Respectfully submitted, | ||
CAWLEY, GILLESPIE & ASSOCIATES, INC. | ||
Texas Registered Engineering Firm F-693 | ||
Kenneth J. Mueller, PE 86132 | ||
Vice President |
KJM:rkf