Attached files
Exhibit 99.1
Endeavour International Corporation
February 28, 2011
Mr. Derek Neilson
Endeavour International Corporation
114 St. Martins Lane
London WC2N 4BE
United Kingdom
Dear Mr. Neilson:
In accordance with your request, we have audited the estimates prepared by Endeavour International
Corporation (Endeavour), as of December 31, 2010, of the proved reserves and future revenue to the
Endeavour interest in certain oil and gas properties located in the United Kingdom and the United
States. Endeavours estimates for Bacchus Field, located in the United Kingdom, reflect a working
interest of 10 percent, which is the interest owned by Endeavour prior to the February 2011
execution of the Sales and Purchase Agreement that increases their working interest in the field to
30 percent. It is our understanding that the proved reserves estimates shown herein constitute all
of the proved reserves owned by Endeavour. We have examined the estimates with respect to reserves
quantities, reserves categorization, future producing rates, future net revenue, and the present
value of such future net revenue, using the definitions set forth in U.S. Securities and Exchange
Commission (SEC) Regulation S-X Rule 4-10(a). The estimates of reserves and future revenue have
been prepared in accordance with the definitions and guidelines of the SEC and, with the exception
of the exclusion of future income taxes, conform to the FASB Accounting Standards Codification
Topic 932, Extractive ActivitiesOil and Gas. We completed our audit on February 23, 2011. This
report has been prepared for Endeavours 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.
The following table sets forth Endeavours estimates of the net reserves and future net revenue, as
of December 31, 2010, for the audited properties:
Endeavour International Corporation
Net Reserves | Future Net Revenue ($) | |||||||||||||||||||
Oil | NGL | Gas | Present Worth | |||||||||||||||||
Country/Category | (Barrels) | (Barrels) | (MCF) | Total | at 10% | |||||||||||||||
UNITED KINGDOM |
||||||||||||||||||||
Proved Developed Producing |
1,055,465 | 26,559 | 497,832 | 42,386,138 | 42,264,733 | |||||||||||||||
Proved Developed Non-Producing |
152,411 | 5,633 | 57,333 | 9,354,294 | 8,111,145 | |||||||||||||||
Proved Undeveloped |
2,423,845 | 0 | 55,621,793 | 252,783,202 | 150,444,221 | |||||||||||||||
Total Proved |
3,631,722 | 32,193 | 56,176,957 | 304,523,633 | 200,820,098 | |||||||||||||||
UNITED STATES |
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Proved Developed Producing |
14,201 | 0 | 13,145,879 | 40,247,126 | 28,174,878 | |||||||||||||||
Proved Developed Non-Producing |
179 | 0 | 135,431 | 259,404 | 64,602 | |||||||||||||||
Proved Undeveloped |
44,412 | 0 | 18,495,233 | 28,957,851 | 9,507,042 | |||||||||||||||
Total Proved |
58,792 | 0 | 31,776,543 | 69,464,380 | 37,746,522 | |||||||||||||||
ALL PROPERTIES |
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Proved Developed Producing |
1,069,666 | 26,559 | 13,643,711 | 82,633,264 | 70,439,611 | |||||||||||||||
Proved Developed Non-Producing |
152,590 | 5,633 | 192,764 | 9,613,697 | 8,175,747 | |||||||||||||||
Proved Undeveloped |
2,468,257 | 0 | 74,117,025 | 281,741,053 | 159,951,262 | |||||||||||||||
Total Proved |
3,690,514 | 32,193 | 87,953,500 | 373,988,014 | 238,566,620 |
Totals may not add because of rounding.
The oil reserves shown include crude oil and condensate. Oil and natural gas liquids (NGL) volumes
are expressed in barrels that are equivalent to 42 United States gallons. Gas volumes are
expressed in thousands of cubic feet (MCF) at standard temperature and pressure bases. Monetary
values shown in this report are expressed in United States dollars ($).
When compared on a field-by-field basis, some of the estimates of Endeavour are greater and some
are less than the estimates of Netherland, Sewell & Associates, Inc. (NSAI). However, in our
opinion the estimates of Endeavours proved reserves and future revenue shown herein are, in the
aggregate, reasonable and 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
Endeavour International Corporation
Standards). Additionally, these estimates, in the aggregate, are within the
recommended 10 percent tolerance threshold set forth in the SPE
Standards. We are satisfied with
the methods and procedures used by Endeavour in preparing the December 31, 2010, estimates of
reserves and future revenue, and we saw nothing of an unusual nature that would cause us to take
exception with the estimates, in the aggregate, as prepared by Endeavour.
The estimates shown herein are for proved reserves. Endeavours estimates do not include probable
and possible reserves that exist for these properties, nor do they include any value for
undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated.
Reserves categorization conveys the relative degree of certainty; reserves subcategorization is
based on development and production status. The estimates of reserves and future revenue included
herein have not been adjusted for risk.
Oil and NGL prices used by Endeavour 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
United Kingdom properties, the average Dated Brent price of $79.37 per barrel is adjusted by field
for quality, transportation fees, and regional price differentials. For United States properties,
the average West Texas Intermediate price of $75.96 per barrel is adjusted by field for quality,
transportation fees, and regional price differentials. All oil and NGL 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 $78.89 per barrel of oil and $41.70 per barrel of
NGL.
Gas prices used by Endeavour 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
United Kingdom properties, the average National Balancing Point spot price of 42.49 pence per therm
(equivalent to $6.591 per MMBTU) is adjusted by field for energy content, transportation fees, and
regional price differentials. For United States properties, the average Henry Hub spot price of
$4.376 per MMBTU is adjusted by field for energy content, transportation fees, and regional price
differentials. All gas prices are held constant throughout the lives of the properties. The
average adjusted gas price weighted by production over the remaining lives of the properties is
$6.142 per MCF.
Lease and well operating costs used by Endeavour are based on historical operating expense records.
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 Endeavour 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. Endeavours estimates of capital
costs are included as required for
Endeavour International Corporation
workovers, new development wells, production equipment, and
abandonment. The future capital costs are held constant to the date of expenditure.
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, estimates of Endeavour and NSAI are based on 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 Endeavour to recover
the reserves, and that 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 these
estimates.
It should be understood that our audit does not constitute a complete reserves study of the audited
oil and gas properties. Our audit consisted primarily of substantive testing, wherein we conducted
a detailed review of all properties. In the conduct of our audit, we have not independently
verified the accuracy and completeness of information and data furnished by Endeavour with respect
to ownership interests, oil and gas production, well test data, historical costs of operation and
development, product prices, or any agreements relating to current and future operations of the
properties and sales of production. However, if in the course of our examination something came to
our attention that brought into question the validity or sufficiency of any such information or
data, we did not rely on such information or data until we had satisfactorily resolved our
questions relating thereto or had independently verified such information or data. Our audit did
not include a review of Endeavours overall reserves management processes and practices.
We used standard engineering and geoscience methods, or a combination of methods, including
performance analysis, volumetric analysis, analogy, and reservoir modeling, that we considered to
be appropriate and necessary to establish the conclusions set forth herein. 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.
Supporting data documenting this audit, along with data provided by Endeavour, are on file in our
office. The technical persons responsible for conducting this audit meet the requirements
regarding qualifications, independence, objectivity, and confidentiality set forth in the SPE
Standards. We are
Endeavour International Corporation
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
|
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Chairman and Chief Executive Officer | ||||||||||
By:
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/s/ Derek F. Newton
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By: | /s/ David E. Nice
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Vice President | Vice President | |||||||||
Date Signed: February 28, 2011 | Date Signed: February 28, 2011 |
DFN:KEA
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