Attached files
Exhibit
99.1
Cawley, Gillespie & Associates, Inc.
petroleum consultants
13640 BRIARWICK DRIVE, SUITE 100
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306 WEST SEVENTH STREET, SUITE 302
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1000 LOUISIANA STREET, SUITE 1900
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AUSTIN, TEXAS 78729-1107
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FORT WORTH, TEXAS 76102-4987
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HOUSTON, TEXAS 77002-5008
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512-249-7000
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817- 336-2461
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713-651-9944
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www.cgaus.com
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March
6, 2020
Mr.
Clayton J. Riddle
PEDEVCO
Corp.
1250
Wood Branch Park Dr. Suite 400
Houston,
TX 77079
Re:
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Evaluation
Summary
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PEDEVCO Corp. Interests
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Various
Oil Properties in Colorado & New Mexico
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Total
Proved Reserves
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As of
December 31, 2019
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Pursuant to the Guidelines of the Securities and
Exchange
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Commission for Reporting Corporate Reserves and
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Future Net Revenue
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Dear
Mr. Riddle:
As
requested, this report was completed on March 6, 2020 for PEDEVCO
Corp. (“PEDEVCO”), for the purpose of public disclosure by PEDEVCO in filings made with
the Securities and Exchange
Commission (SEC) in accordance
with the disclosure requirements set forth in the SEC
regulations. We evaluated 100% of the Colorado and New
Mexico proved reserves, as per information from PEDEVCO. This
report, with an effective date of December 31, 2019, was prepared
using constant prices and costs and conforms to the guidelines of
the SEC. A composite summary of the results of this evaluation are
presented below:
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Proved
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Proved
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Developed
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Developed
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Proved
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Total
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Producing
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Non-Producing
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Undeveloped
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Proved
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Net
Reserves
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Oil
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-
Mbbl
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938.2
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1,044.80
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10,376.30
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12,359.30
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Gas
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MMcf
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982.7
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619.1
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8,144.20
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9,746.00
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NGL
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Mbbl
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47.9
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0
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0
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47.9
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Future
Revenue
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Oil
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- M$
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50,610.7
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57,497.00
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570,523.50
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678,631.20
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Gas
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- M$
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2,139.1
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1,349.40
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13,532.50
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17,021.00
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NGL
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- M$
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477.5
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0
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0
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477.5
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Severance
Taxes
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- M$
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3,297.2
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3,942.90
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38,910.10
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46,150.10
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Ad
Valorem Taxes
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- M$
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2,224.0
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2,772.50
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27,298.90
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32,295.50
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Operating
Expenses
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- M$
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15,320.8
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9,082.80
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97,511.60
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121,915.20
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Other
Deductions
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- M$
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3,887.2
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6,572.20
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61,802.30
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72,261.70
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Investments
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- M$
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2,168.1
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3,607.00
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168,626.30
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174,401.40
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Net
Operating Income (BFIT)
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- M$
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26,330.1
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32,869.00
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189,906.80
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249,105.90
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Discounted @ 10%
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- M$
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19,024.6
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20,960.40
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82,757.90
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122,742.90
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(Present Worth)
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PEDEVCO Corp. Interests
March
6, 2020
Page
2
Future
revenue is prior to deducting state production taxes and ad valorem
taxes. Future net cash flow (net operating income) is after
deducting these taxes, future capital costs, and operating
expenses, but before consideration of federal income taxes. In
accordance with SEC guidelines, the future net cash flow has been
discounted at an annual rate of ten percent to determine its
“present worth”. The present worth is shown to indicate
the effect of time on the value of money and should not be
construed as being the fair market value of the
properties.
The oil
reserves include oil and condensate. Oil and natural gas liquid
(NGL) volumes are expressed in barrels (42 U.S. gallons). Gas
volumes are expressed in thousands of standard cubic feet (Mcf) at
contract temperature and pressure base.
Our
estimates are for proved reserves only and do not include any
probable or possible reserves nor have any values been attributed
to interest in acreage beyond the location for which undeveloped
reserves have been estimated. The Proved Developed category is the
summation of the Proved Developed Producing and Proved Developed
Non-Producing estimates.
Presentation
The
report contains summaries by reserve category. The reserve
categories presented are: Total Proved (TP), Proved Developed
Producing (PDP), Proved Developed Non-Producing (PDNP), and Proved
Undeveloped (PUD).
Hydrocarbon Pricing
The base SEC
oil and gas prices calculated for December 31, 2019 were $55.69 per
barrel and $2.58 per MMBTU, respectively. As specified by the SEC,
a company must use a 12-month average price, calculated as the
unweighted arithmetic average of the first-day-of-the-month price
for each month within the 12-month period prior to the end of the
reporting period. The SEC base oil price is based upon WTI-Cushing
spot prices (EIA) during 2019 and the SEC base gas price is based
upon Henry Hub spot prices (Platts Gas Daily) during 2019. A
summary of pricing parameters for the New Mexico assets is shown in
the table below.
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Crude Oil
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Natural Gas
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Price
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Price
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Base
Price ($/BBL, $/MMBtu)
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55.69
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2.58
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Chaveroo
Differential ($/BBL, $/MMBtu)
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-0.66
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-0.4
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Milnesand
Differential ($/BBL, $/MMBtu)
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-0.61
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-1.62
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Chaveroo
Net Price ($/BBL, $/Mcf)
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55.03
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2.18
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Milnesand
Net Price ($/BBL, $/Mcf)
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55.08
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0.96
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The
base prices were adjusted for differentials on a per-field basis
for the New Mexico assets and on a per-operator basis for the
Colorado assets, which may include local basis differentials,
transportation, gas shrinkage, gas heating value (BTU content)
and/or crude quality and gravity corrections. After these
adjustments, the net realized prices over the life of the proved
properties were estimated to be $54.908 per barrel for oil, $1.746
per MCF for gas, and $9.977 per barrel for NGLs. All economic
factors were held constant in accordance with SEC
guidelines.
PEDEVCO Corp. Interests
March
6, 2020
Page
3
Expenses, Investments, and Taxes
New Mexico Assets:
Lease
operating expenses (LOE) for each producing well were estimated
from 2019 monthly lease operating statements. All economic
parameters, including lease operating expenses and investments,
were held constant (not escalated) throughout the life of these
properties.
Chaveroo Field
fixed LOE was applied at $2,896 per producing well per month.
Milnesand Field fixed LOE was applied at $2,002 per producing well
per month. For new horizontal drills in both fields, operating
costs were applied to start at $7,736 per well per month for the
first 24 months, then $4,000 per well per month thereafter for the
life of the well.
Capital
costs for PUD drills, facility upgrades and abandonment were
provided by PEDEVCO. Infill drilling at Chaveroo Field was
scheduled to cost $2,115,398 per 3200-foot horizontal drill (4),
$2,518,968 per 4500-foot horizontal drill (44), $2,698,648 per
5500-foot horizontal drill (3), $2,894,258 per 7000-foot horizontal
drill (10) and $8,000,000 for water-handling facility upgrades.
Infill drilling at Milnesand Field was scheduled to cost $2,237,318
per 4500-foot horizontal drill (15), $2,698,648 per 5500-foot
horizontal drill (2), $2,894,258 per 7000-foot horizontal drill
(10) and $6,500,000 for water-handling facility upgrades.
Abandonment costs for Chaveroo and Milnesand field wells were
applied at $35,000 per producing well and $40,000 per new
horizontal drills, as provided.
Severance taxes
were applied at New Mexico rates of 7.09% of oil revenue and 7.94%
of gas revenue. Ad valorem taxes were applied at 5.00% of total
revenue as per PEDEVCO.
Colorado Assets:
Lease
operating expenses (LOE) were estimated from 2019 monthly lease
operating statements and applied on a per operator basis. All
economic parameters, including lease operating expenses and
investments, were held constant (not escalated) throughout the life
of these properties.
Severance taxes
were applied at Colorado rates of 5.00% of oil revenue and 5.00% of
gas revenue. Ad valorem taxes were applied at 3.00% of total
revenue as per PEDEVCO.
SEC Conformance and Regulations
The
reserve classifications and the economic considerations used herein
conform to the criteria of the SEC. The reserves and economics are
predicated on regulatory agency classifications, rules, policies,
laws, taxes, and royalties currently in effect except as noted
herein. PEDEVCO’s operations may
be subject to various levels of governmental controls and
regulations. These controls and regulations may include matters
relating to land tenure, drilling, production practices,
environmental protection, marketing and pricing policies,
royalties, various taxes and levies including income tax and are
subject to change from time to time. Such changes in
governmental regulations and policies may cause volumes of reserves
actually recovered and amounts of income actually received to
differ significantly from the estimated
quantities.
This
evaluation includes five (5) proved undeveloped locations in
Colorado, of which all are commercial in this evaluation, and 88
proved undeveloped locations in New Mexico, of which 58 are
commercial in this evaluation. Each of these commercial drilling
locations proposed as part of PEDEVCO’s development plans
conforms to the proved undeveloped standards as set forth by the
SEC. In our opinion, PEDEVCO has indicated they have every intent
to complete this development plan as scheduled. Furthermore,
PEDEVCO has demonstrated that they have the proper company
staffing, financial backing and prior development success to ensure
this development plan will be fully executed.
PEDEVCO Corp. Interests
March
6, 2020
Page
4
Reserves Estimation Methods
The
methods employed in estimating reserves are industry standard
methods that are appropriate for the assets evaluated. PDP reserves
were forecast using production performance reserve estimation
methods. PDNP and PUD reserves for each field were estimated using
a blend of type curve analysis, material balance calculations,
volumetric estimates and analogy forecasting techniques. These
methods provide a relatively high degree of accuracy for predicting
proved undeveloped reserves for PEDEVCO properties, due to the
mature nature of their properties targeted for development and an
abundance of subsurface control data. The assumptions, data,
methods and procedures used herein are appropriate for the purpose
served by this report.
General Discussion
The
estimates and forecasts were based upon interpretations of data
furnished by your office and available from our files. To some
extent information from public records has been used to check
and/or supplement these data. The basic engineering and geological
data were 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. All
estimates represent our best judgment based on the data available
at the time of preparation. Reserves estimates will generally be
revised as additional geologic or engineering data become available
or as economic conditions change. Moreover, estimates of
reserves may increase or decrease as a result of future operations,
effects of regulation by governmental agencies or geopolitical or
economic 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.
An
on-site field inspection of the properties has not been performed.
The mechanical operation or condition of the wells and their
related facilities have not been examined nor have the wells been
tested by Cawley, Gillespie & Associates, Inc. Possible
environmental liability related to the properties has not been
investigated nor considered. The cost of plugging and the salvage
value of equipment at abandonment have been included in this
evaluation.
Cawley,
Gillespie & Associates, Inc. is a Texas Registered Engineering
Firm (F-693), made up of independent registered professional
engineers and geologists that have provided petroleum consulting
services to the oil and gas industry for over 50 years. This
evaluation was supervised by W. Todd Brooker, President at Cawley,
Gillespie & Associates, Inc. and a State of Texas Licensed
Professional Engineer (License #83462). We do not own an interest
in the properties or PEDEVCO Corp. and are not employed on a
contingent basis. We have used all methods and procedures that we
consider necessary under the circumstances to prepare this report.
Our work-papers and related data utilized in the preparation of
these estimates are available in our office.
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Yours
very truly,
CAWLEY, GILLESPIE & ASSOCIATES, INC.
Texas Registered Engineering Firm F-693
W. Todd
Brooker, P. E.
President
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