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S-1 - S-1 - Dynamic Offshore Resources, Inc.a2205401zs-1.htm
EX-23.3 - EX-23.3 - Dynamic Offshore Resources, Inc.a2205401zex-23_3.htm
EX-23.2 - EX-23.2 - Dynamic Offshore Resources, Inc.a2205401zex-23_2.htm
EX-23.1 - EX-23.1 - Dynamic Offshore Resources, Inc.a2205401zex-23_1.htm
EX-99.3 - EX-99.3 - Dynamic Offshore Resources, Inc.a2205401zex-99_3.htm
EX-99.4 - EX-99.4 - Dynamic Offshore Resources, Inc.a2205401zex-99_4.htm
EX-99.5 - EX-99.5 - Dynamic Offshore Resources, Inc.a2205401zex-99_5.htm
EX-99.2 - EX-99.2 - Dynamic Offshore Resources, Inc.a2205401zex-99_2.htm
EX-99.1 - EX-99.1 - Dynamic Offshore Resources, Inc.a2205401zex-99_1.htm

Exhibit 99.6

         GRAPHIC

August 23, 2011

Mr. John Y. Jo
Dynamic Offshore Resources, LLC
1301 McKinney Street, Suite 900
Houston, Texas 77010

Dear Mr. Jo:

        In accordance with your request, we have prepared a price sensitivity to our report dated August 22, 2011, which sets forth our estimates of reserves and future revenue, as of March 31, 2011, to the Potential Acquisition interest in certain oil and gas properties located in Alabama, Louisiana, Texas, and federal waters in the Gulf of Mexico. It is our understanding that Dynamic Offshore Resources, LLC (Dynamic) has entered into a binding agreement with Moreno Offshore Resources, LLC to purchase this additional interest; the effective date of the acquisition will be March 31, 2011. We completed our evaluation of these same properties to the Dynamic interest on July 25, 2011. The estimates in the August 22 report were prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission (SEC) and conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas, except that per-well overhead expenses are excluded for operated properties and insurance costs and future income taxes are excluded for all properties. The projections for this report are the same as for our report dated August 22. However, the price parameters have changed and the economic lives and commerciality of the individual leases have been redetermined; as a result, the forecasts of reserves and revenue presented in this report are different from those shown in the August 22 report. The price and costs parameters used in this sensitivity have been specified by Dynamic. With the exception of these changes, we completed our evaluation on July 25, 2011. For your reference, the SEC definitions are presented immediately following this letter. This report has been prepared for Dynamic'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 Potential Acquisition interest in these properties, as of March 31, 2011, to be:

 
  Net Reserves   Future Net Revenue (M$)  
Category
  Oil
(MBBL)
  Gas
(MMCF)
  Total   Present Worth
at 10%
 

Proved Developed Producing

    1,321.7     3,723.4     89,199.8     70,745.0  

Proved Developed Non-Producing

                         
 

Behind-Pipe

    874.5     3,575.6     88,430.0     59,220.6  
 

Shut-In

    3.4     6.2     332.0     269.6  
                   
   

Total Proved Developed Non-Producing

    878.0     3,581.9     88,761.9     59,490.2  

Proved Undeveloped

    234.5     330.9     17,161.3     11,381.0  

Abandonment Costs

    0.0     0.0     (27,235.8 )   (9,565.2 )
                   
   

Total Proved

    2,434.1     7,636.2     167,887.2     132,050.9  

Probable Developed

    41.5     192.4     4,792.3     2,932.9  

Probable Undeveloped

    157.9     666.3     14,056.9     9,746.2  
                   
   

Total Probable

    199.4     858.7     18,849.2     12,679.1  

Totals may not add because of rounding.

GRAPHIC


GRAPHIC

        The oil reserves shown include crude oil and condensate. Oil volumes are expressed in thousands of barrels (MBBL); a barrel is equivalent to 42 United States gallons. Gas volumes are expressed in millions of cubic feet (MMCF) at standard temperature and pressure bases.

        The estimates shown in this report are for proved and probable reserves. As requested, possible reserves that exist for these properties have not been included. Proved developed non-producing reserves include behind-pipe and shut-in reserves. 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 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 shown in this report is the interest owner's share of the gross (100 percent) revenue from the properties. Future net revenue is after deductions for future capital costs, operating expenses, and abandonment costs 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. Our estimates of future net revenue include Dynamic's estimates of the costs to abandon the wells, platforms, and production facilities, net of any salvage value.

        As requested, this report has been prepared using oil and gas price parameters specified by Dynamic. Oil prices are based on NYMEX West Texas Intermediate prices and are adjusted by field for quality, transportation fees, and regional price differentials. Gas prices are based on NYMEX Henry Hub prices and are adjusted by field for energy content, transportation fees, and regional price differentials. All prices, before adjustments, are shown in the following table:

Period Ending
  Oil Price
($/Barrel)
  Gas Price
($/MMBTU)
 
12-31-2011     109.26     4.59  
12-31-2012     107.44     5.08  
12-31-2013     104.02     5.47  
Thereafter     102.23     5.83  

        For the proved reserves, the average adjusted product prices weighted by production over the remaining lives of the properties are $103.61 per barrel of oil and $6.044 per MCF of gas.

        Lease and well operating costs used in this report are based on operating expense records of Dynamic. For nonoperated properties, 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. As requested, lease and well operating costs for the operated properties include only direct lease- and field-level costs. For all properties, headquarters general and administrative overhead expenses of Dynamic are not included. Also as requested, insurance costs have been excluded. As requested, 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 and abandonment 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 Potential Acquisition 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 the interest owner receiving its net revenue interest share of estimated future gross gas production.


GRAPHIC

        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 commercially recoverable; probable and possible reserves are those additional reserves which are sequentially less certain to be recovered than proved reserves. 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 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 the interest owner 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, seismic data, 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 Dynamic, 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-2699

 

 

 

 

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/ EDWARD C. ROY III  
   
 
     
 
    Richard B. Talley, Jr., P.E. 102425       Edward C. Roy III, P.G. 2364
    Vice President       Geologist

Date Signed: August 23, 2011

 

Date Signed: August 23, 2011

RBT:SBG

 

 

 

 

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