Attached files
Exhibit
99.1
Russell
K. Hall and Associates
Petroleum
Engineering Consultants
303
W. Wall St., Suite 1102
Midland,
Texas 79701
432-683-6622
E-Mail:
Russell@russellkhall.com
March
7, 2018
FieldPoint
Petroleum Corporation
Attn:
Mr. Phil Roberson
609
Castle Road, Suite 335
Austin,
TX 78746
Re: Evaluation of Oil and Gas Reserves to the interest of
FieldPoint Petroleum Corporation
Effective January 1, 2018
based on Security Exchange Commission Guidelines
Mr. Roberson,
In accordance with your request, we have estimated the extent and
value of domestic proved crude oil, condensate and gas reserves
owned by FieldPoint Petroleum Corporation as of January 1, 2018.
The properties to which proved reserves are attributable are
located in the states of Louisiana, New Mexico, Oklahoma, Texas and
Wyoming. The estimated reserves are based on a detailed study of
properties owned by FieldPoint Petroleum Corporation. During this
study, we consulted freely with the officers and employees of
FieldPoint Petroleum Corporation and were given access to such
records, geological and engineering reports, and other data as were
desired for examination. In preparation of this report, we have
relied, without independent verification, upon information
furnished by FieldPoint Petroleum Corporation with respect to
property interest owned by it, production from such properties,
current costs of operation, current prices for production
agreements relating to current and future operation and various
other information and data which were accepted as represented. The
results of our third-party study, completed on March 7, 2018, are
presented herein. The properties reviewed by Russell K. Hall &
Associates represent only properties in Chaves, Lea and Loving
Counties, New Mexico, Caddo Parish, Louisiana, Caddo, Dewey, and
Grady Counties, Oklahoma, Andrews, Harris, Lee and Midland
Counties, Texas and Converse County, Wyoming of the total net
proved reserves of FieldPoint Petroleum Corporation.
The summary below includes FieldPoint Petroleum Corporation Proved
Reserves only. It was not considered necessary to make a field
examination of the physical condition and operation of the
properties in which FieldPoint Petroleum Corporation owns an
interest.
1
We estimate the Net Proved Reserves, Future Net Revenue, and the
Present Value of Future Net Revenue from the properties of
FieldPoint Petroleum Corporation as of January 1, 2018, to be as
follows:
Classification
of Reserves
|
Oil and
Condensate
(MBBL)
|
Gas
(MMCF)
|
Future Net
Revenue
(M$)
|
Present Value
Discounted at 10 % (M$)
|
Proved
Developed:
|
|
|
|
|
Producing
|
260
|
684
|
16,968
|
4,743
|
Non-Producing
|
168
|
27
|
7,987
|
2,114
|
|
|
|
|
|
Total
Proved
|
428
|
711
|
24,865
|
6,857
|
|
|
|
|
|
The following table sets forth the changes in total Proved Reserves
owned by FieldPoint Petroleum Corporation as of January 1,
2018.
|
Net
Liquid
(MBBL)
|
Net
Gas
(MMCF)
|
Total
Proved Reserves Developed and Undeveloped:
|
|
|
Beginning
of Period January 1, 2017
|
490
|
757
|
Revisions
of Previous Estimates
|
123
|
28
|
Beginning
of Period as Revised
|
613
|
785
|
|
|
|
Additions
from Drilling and Purchase
|
0
|
0
|
Extensions
|
0
|
0
|
Sales
of Minerals-in-Place
|
(42)
|
(20)
|
Production
|
(143)
|
(54)
|
End
of Period January 1, 2018
|
428
|
711
|
|
|
|
Proved
Developed Reserves:
|
|
|
Beginning
of Period January 1, 2017
|
490
|
757
|
End
of Period January 1, 2018
|
428
|
711
|
The
proved reserves included herein conform to the definition as set
forth in the Securities and Exchange Commission’s
(“SEC”) Regulations Part 210.4-10(a). An abridged
version of the SEC reserves definitions from 210.4-10(a) entitled
“Definitions of Oil and Gas Reserves” is included as an
attachment to this report. Reserves for the producing properties
were determined by extrapolation of the production decline trends,
where applicable, analogy with similar offset wells, by volumetric
calculations using basic reservoir parameters such as porosity,
water saturation, net pay thickness, and estimated areal extent of
the reservoir, or by material balance calculations. Reserves for
the Proved Developed Non-Producing properties were determined by
volumetric calculations and/or by analogy with offset
wells.
2
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. Moreover, estimates of reserves may increase or
decrease as a result of future operations, effects of regulation by
governmental agencies or geopolitical risks. As a result, the
estimates of oil and gas reserves have an intrinsic uncertainty.
The reserves included in this report are therefore estimates only
and should not be construed as being exact quantities. They may or
may not be actually recovered, and if recovered, the revenues
therefrom and the actual costs related thereto could be more or
less than the estimated amounts.
The
estimates of reserves presented herein were based upon a detailed
study of the properties in which FieldPoint Petroleum Corporation
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 liability to restore and clean up
damages, if any, caused by past operating practices.
To
estimate economically recoverable oil and gas reserves and related
future net cash flows, 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 demonstrated to be economically
producible based on existing economic conditions including the
prices and costs at which economic producibility from a reservoir
is to be determined as of the effective date of the report.
FieldPoint Petroleum Corporation has informed us that they have
furnished us all the accounts, records, geological and engineering
data, and reports and other data required for this investigation.
In preparing our forecast of future production and income, we have
relied upon data furnished by FieldPoint Petroleum Corporation 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, geological structural and isopach maps, well logs,
core analyses, and pressure measurements. Russell K. Hall &
Associates reviewed such factual data for its reasonableness;
however, we have not conducted an independent verification of the
data supplied by FieldPoint Petroleum Corporation.
The
value estimated in this report is based on the assumptions that the
properties are not negatively affected by the existence of
hazardous substances or detrimental environmental conditions. We
are experts in the identification of hazardous substances or
detrimental environmental conditions but have not been asked to
perform an environmental study. It is possible that tests and
inspections conducted by a qualified hazardous substance and
environmental expert could reveal the existence of hazardous
material and environmental conditions on or around the properties
that would negatively affect the properties' value.
Property
identification, expense and revenue interests, actual product
prices, and operating expenses were provided by FieldPoint
Petroleum Corporation. This data was not verified by inspection of
internal records and files, nor was a physical inspection made of
the properties. Information regarding prices and the particular
pricing categories under current governmental regulations was
supplied by FieldPoint Petroleum Corporation.
3
Net oil and gas reserves are estimated quantities of crude oil,
natural gas, and natural gas liquids attributed to the revenue
interests of FieldPoint Petroleum Corporation. Net income to the
interests of FieldPoint Petroleum Corporation is the future net
revenue after deduction of state and county taxes, operating
expenses, and investments, if applicable. The resulting net income
is before federal income tax and does not consider any encumbrances
against the properties, if such exist. Minor variations in
composite columns totals result from computer rounding. Values of
the estimated net proved reserves are expressed in terms of future
net revenue and present value of future net revenue. Future net
revenues are calculated by deducting estimated operating expenses,
capital costs, and severance and ad Valorem taxes from the future
gross revenue.
Present
value of future net revenue is calculated by discounting the future
net revenue at the rate of ten percent (10%) per annum compounded
monthly over the expected period of realization. The present value
set forth in this report does not necessarily represent the fair
market value of the evaluated interests.
A
summary projection of the estimated future net revenue and present
value of future net revenue as of January 1, 2017 is as
follows:
Year
|
Proved
Developed
Future Net
Revenue $
|
Discounted at
10% $
|
|
|
|
2018
|
1,180,538
|
1,128,496
|
2019
|
1,364,257
|
1,173,996
|
2020
|
1,524,944
|
1,205,457
|
Remaining
|
7,604,685
|
3,349,055
|
Total
|
11,674,424
|
6,857,004
|
The
future net revenue set forth above reflects estimated capital
expenditures in the amount of $86,469.00 necessary to develop those
reserves classified as Proved Developed Producing and Proved
Developed Non-Producing.
Estimated
reserves and future net income amounts presented in this report, as
of January 1, 2018, are related to hydrocarbon prices. The
hydrocarbon prices used in the preparation of this report are based
on the average prices during the twelve (12) month period prior to
the ending date of the period covered in this report (determined as
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). The benchmark price of $51.34 per barrel has been
adjusted by lease for gravity, transportation fees and regional
price differentials to an average of $47.03. Gas prices per
thousand cubic feet (MCF) are based on a benchmark price of $2.98
per MCF and have been adjusted by lease for BTU content,
transportation fees and regional price differentials to an average
of $4.546. The oil and gas prices were held constant for the
economic life of the properties as specified by the SEC. Oil
volumes shown herein are expressed in barrels, which are equivalent
to forty-two (42) United States gallons. Gas volumes are expressed
at standard conditions of sixty degrees (60°) Fahrenheit and
at the standard pressure base of the respective area in which the
reserves are located.
Operating
expenses including direct and indirect overhead expenses were
supplied by FieldPoint Petroleum Corporation and were held constant
for the life of the properties. Severance and ad valorem taxes were
deducted in the lease reserves and economics projections at the
standard state rates.
4
Russell
K. Hall & Associates is an Independent Petroleum Consulting
Firm that has been providing Petroleum Consulting Services
throughout the world for forty (40) years. Russell K. Hall &
Associates does not have any financial interest, including stock
ownership, in FieldPoint Petroleum Corporation. Our fees were not
contingent on the results of our evaluation. Russell K. Hall &
Associates has used all procedures and methods that it considered
necessary to prepare this report. The technical persons responsible
for preparing the reserve estimates presented herein meet the
requirements regarding qualification, independence, objectivity,
and confidentiality set forth in the Standards Pertaining to the
Estimating and Auditing of Oil and Gas Reserves Information
promulgated by the Society of Petroleum Engineers.
This
report is solely for the information of and assistance to
FieldPoint Petroleum Corporation for their use in SEC filings. It
is not to be used, circulated, quoted, or otherwise referred to for
any purpose without the express written consent of the undersigned
except as required by law. Data utilized in this report will be
maintained in our files and is available for your use.
In
summary, we consider the assumptions, data, methods and analytical
procedures used in this report appropriate for the purpose hereof,
and we have used all such methods and procedures that we consider
necessary and appropriate to prepare the estimates of reserves
herein. The proved reserves included herein were
determined in conformance with the SEC Modernization of Oil and Gas
Reporting; Final Rule, including all references to Regulation S-X
and Regulation S-K, referred to herein collectively as the
“SEC Regulations.” In our opinion, the
proved reserves presented in this report comply with the
definitions, guidelines and disclosure requirements as required by
the SEC regulations.
It
has been our privilege to serve you by preparing this
evaluation.
Yours
Very Truly,
___________________________________________
Russell
K. Hall
Texas
P. E. no. 69926
Russell
K. Hall and Associates, Inc.
Registration
No. F-022199
5
DEFINITIONS OF OIL AND GAS RESERVES
17 CFR § 210.4-10 Federal Register Dated December 31,
2008/Filed January 13, 2009
Developed oil and gas reserves
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.
Undeveloped oil and gas reserves
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, or by
other evidence using reliable technology establishing reasonable
certainty.
Proved oil and gas reserves 2
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 from known reservoirs, and under existing
economic conditions, operating methods, and government regulations
– prior 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
(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.
(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.
6
(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 government 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-date-of-the-month
price for each month within such period, unless prices are defined
by contractual arrangements, excluding escalations based upon
future conditions.
2 Russell K. Hall & Associates separates proved developed
reserves into proved developed producing and proved developed
nonproducing reserves. This is to identify proved developed
producing reserves as those to be recovered from actively producing
wells; proved developed nonproducing reserves as those to be
recovered from wells or intervals within wells, which are completed
but shut in waiting on equipment or pipeline connections, or wells
where a relatively minor expenditure is required for recompletion
to another zone.
7
April
2, 2018
Russell K. Hall &
Associates is an Independent Petroleum
Engineering Consulting Firm that has been providing Petroleum
Consulting services throughout the United States for over 21 years.
Russell K. Hall and Associates does not have any financial
interest, including stock ownership, in FieldPoint. Our fees were
not contingent on the results of our evaluation. This letter report
has been prepared at the request of FieldPoint and should not be
used for purposes other than those for which it is intended.
Russell K. Hall and Associates has used all procedures and methods
that it considers necessary to prepare this
report.
Standard
Board and Rules 4-lO(a) (1)-(32) of Regulation S-X and Rules
302(b), 1201, 1202(a) (1), (2), (3), (4), (8), and 1203(a) of
Regulations S-K of the Securities and Exchange Commission;
provided, however, future income tax expenses have not been taken
into account in estimating the future new revenue and present worth
values set forth herein.
Submitted,
Russell
K. Hall
Texas
P. E. no. 69926
Russell
K. Hall and Associates, Inc.
Registration
No. F-022199
8
CERTIFICATE
OF QUALIFICATION
I, Russell K. Hall, Petroleum Engineer with Russell K. Hall and
Associates, 303 W. Wall St., Suite 1102, Midland, Texas 79701,
U.S.A., hereby certify:
1.
That
I am the owner of Russell K. Hall and Associates, which company did
prepare the letter report addressed to FieldPoint dated March 7,
2018, and that I, as owner, was responsible for the preparation of
this report.
2.
That
I attended The University of Oklahoma, and that I graduated with a
Bachelor of Science degree in Mechanical Engineering in the year
1978; that I am a Registered Professional Engineer in the State of
Texas; that I am a member of the Society of Petroleum Engineers and
that I have in excess of 39 years of experience in the oil and gas
reservoir studies and reserves evaluations.
9