Montecito Exhibit b to Supplement

7/28/2019 Montecito Exhibit b to Supplement

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OIL COMPANY I1C

November 21 2008

TO ALL EMPIRE PARTNERS

Re Schiumberger Reserve Report

Empire Well Plaquemines Parish LA

Gentlemen

Virgin utilizes Schlumberger-Holditch Reservoir Engineers for third-party calculation of

its reserve estimates They have just completed their reserve estimates for our well at

Empire The summary pages are enclosed for your information

To assist you in estimating the value of your interest will show you calculation for1% ownership interest On the first page first column you will see Proved UndevelopedReserves with Future Net Income at $74518734 This is the estimated reserves wenow have behind-pipe in our well that we will be producing in the near future If you

multiply your percentage times the future net income you will get your estimated future

net income In my example of 1% 1% $74518734 $745187.34 The bottom rowof numbers show the future net income estimate discounted to

present valueat 10%

The1% would be $455116.41

Please be advised that this is only an estimate of the reserves based on the information

assessed at this time and the actual production may turn out to be significantly less

Ii OL_Robert

iith

Presiden1

ki

909 Poydras Street Suite 2200 New Orleans Louisiana 70112 504-52569O9 504-529-2362 Fax

Case 11-13028 Claim 25-1 Part 4 Filed 05/11/12 Exhibit Exhibit B to SupplementPage 1 of 8


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Data Consulting Seivices

Division of Schlumborger Technology Corporation

1515 Poydras Street Suite 2700

ScklumhergerNew Orleans LA 70112Tel 504-592-5200

November 20 2008

Virgin Oil Company Inc

909 Poydras Street Suite 2200

New Orleans Louisiana 70112

Attention Mr Tony Smith

Dear Mr Smith

At therequest of Virgin Oil Company Inc Virgin Data COnSulting Services Division ofSchiumberger Technology Corporation DCS has prepared res erve and economjc evaluation of oiland gas interests in the Empire Field owned by Virgin and its investors and located onshore inLouisiana The reserve and

economic evaluation was prepared as of August 2008 The results of ourevaluation are summarized in the tables below

ESTIMATED GROSS RESERVES INCOMECERTAIN OIL GAS INTERESTS

ONSHORE LOUISIANAEVALUATED FOR VIRGIN OIL COMPANY INC

AS OF AUGUST 2008

ProvedProbable

Undeveloped Proved Undeveloped ProbableAll

Reserves ReservesReserves Reserves ReservesGross Reserves

OilMBbls 996.841 996.841 6.365 6.365 1003.206Gas MMscf 5915.743 5915.743 937.739 937.739 6853.481

Net Reserves

Oil -MBbls 747.631 747.63 4.774 4.774 752.405GasMMscf 4436.807 4436.807 703.304 703.304 5J40.111

Income Data M$Future Net Revenue 83391.805 83391.805 5257.311 5257.311 88649.1 17Deductions

Operating

Expenses 1015.000 1015.000 90.000 90.000 1105.000Severance Taxes 7083.059 7083059 127.576 127.576 7210.634Investment 775.000 775.000 750.000 750.000 1525.000Abandonment 0.000 500.000 0.000 0.000 500.000

Future Net Income 74518.734 74018.734 4289.735 4289.735 78308.46

Discounted FNI 10% 45511.641 45391.945 954.741 972.984 46364.930



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Data Consulting SeMcos

Division of Schiumberger Technology Corporation

SchiumbergerNovember 20 2008

Page

The Gross Reserves in the above table are to 100%working interest in the lee No deductions havebeen made for royalties and overriding royalties The Net Reserves and all Income

data in the abovetables are t o th e net interests that Virgin provided Appropriate deductions have been made for royaltiesand overriding royalties

The values shown in the tables above are from the economic summaries in EXhibit of thereport Thosevalues may not add up arithmetically due to rounding procedures in the computer software

program usedto prepare the economic projections Exhibit contains summaries by reservescategory Exhibit alsocontains individual

property economics In those cases where the tables above or in the Exhibit includeProved Probable and Possiblereserves the reserves and income

attributable t o t he various reservecategories have not been adjusted to reflect the varying degrees of risk associated with them and t he y a renot comparable

RESERVE CATEGORIES

This report includes proved undeveloped and probable reserves as of August 2008 By definition oiland gas reserves belong to one of thefollowing categories proved probable or possible These

categories are further divided intoa pp ro pr ia te r es er ve status

categories developed andundevelopedThe devekped reserve category is even further divided into the

appropriate r es er ve s ta tu s subcategories producing and nonproducing Nonproducing reserves include shut-in andbehind-pipereserves

The reserve categories used in this report conform t o th e definitions Deterministic Method approvedby the Society of Petroleum Engineers Inc Board ofDirectors March 1997 The definitions ofproved probable and possible reserves are presented in Exhibit of this report

RESERVE ESTIMATES

The reserves that DCS estimated or audited were estimatedusing generally accepted petroleum

engineering practices These reserves estimated by performanceanalysis material balance andvolumetric calculations

Reserve estimates are strictly technical judgme nts Theaccuracy of any reserve estimate is function ofthe

quality of data available and of engineering and geological interpretation The reserve estimatesprepared by or audited by DCS and presented in this

report are believed reasonable however they areestimates only and should be acepted with theunderstanding that reservoir performance

subsequent tothe date of the estimate may justify their revision



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Data Consulting Services


Schhinthorger

November20 2008

Page

PRICING AND ESCALATION PARAMETERS

All oil and gas product prices price differentials operating expenses capital Investments abandonmentcosts and escalation parameters were provided by Virgin prior to preparation of this

report The pricesdifferentials expenses investments abandonmentcosts and escalation parameters are listed below

gas price of $7.000 per MMscf was used for the life of the project Gasprices werenot escalated

Oil An oil price of $70.00 per Bbl was used for the life of the project Oil prices were notescalated

Monthly Lease Operating Expense Monthly lease operating Costs were based on estimatesmade by Virgin The lease operating costs were not escalated

Capital Investments The capital investments were based on estimates made by Virgin For

purposesof this

reportthe

capital investments for Drilling and Completing the well havebeen excluded The capital investments were not escalated

Abandonment Costs The abandonment costs were based on estimates made by Virgin Thecapital investments were not escalated

Severance Tax Louisiana Severance taxes were included

OWNERSHIP

The leasehold interests were provided by Virgin No attempt was made by the undersigned to verify thetitle or

ownershipevaluated

GENERAL

All data used i n t hi s study were obtained from Virgin the operator of the welt public industryinformation sources or the non-confidential files of DCS field inspection of the properties was notmade in connection with the

preparation of this report Abandonment costs were included in this reportbut other potential environmental liabilities a tt en da nt t o

ownership and/or operation of the propertieswere not included in this report

In evaluating the information at our disposal r ela te d t o this report we have excluded from ourconsideration all matters which require legal or

accounting interpretation or any interpretation otherthan those of an engineering or geological nature In assessing the conclusions expressed in this reportpertaining to all aspects of oil and gas evaluations especially pertaining to reserve evaluations t he re a reuncertainties inherent in the

interpretation of engineering data and such conclusionsrepresent only

informed professional judgments



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Data Consulting Services


Schlumberger

November 20 2008

Page

Data and worksheets used in thepreparation of this evaluation will be maintained in our files in NewOrleans and will be available for inspection by anyone having proper authorization by Virgin

This report was prepared solely for the use of theparty to whom it is addressed and

any disclosure made

bysaid

partyof this

report and/or the contents thereofshafl be solely theresponsibility of said party andshall in no way constitute any representation of any kind whatsoever of the

Undersigned with respect tothe matters being addressed

Should you need further assistance in this matter please contact the following DCSemployee who cananswer your questions

James HubbardPrincipal Petroleum Engineer New Orleans

We appreciate the opportunity to serve you and look forward to doing business with you in the future

Verytruly yours

DATA CONSULTING SERVICESDIVISION OF SCHLUMBERGERTECHNOLOGy CORPORATION

James Hubbard P.13

Principal Petroleum Engineer



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Virgin Oil

Well Hookup

State Lease 18165

Empire

Est Start Date____________

Est Comp Date 2nd Qtr 2009

Description

Mobilization Costs

Transportation

Communications Permanent Temporary

Permitting Regulatory

Inspection Costs

Construction Servits

Engineering Consulting Services

Shallow Hazard Site Survey

Insurance Bonds

lE Instrumentation/Electrical/SCADA

Construction Overhead

lntanaibles total

Total

7000

1900

250

4250

21000

96000

15900

9000

25600

6000

8000

194900

Estimated Tangibles Expenses

Description

Site Preparation

Surface Production Equipment

SCADA Electrical Equipment

Gulf South Meter Station

ATMOS Energy Flowline Hot Tap

Pipe/Pipe Support/Fittings/ValvesHook-Up

Supplies Chemicals

Pipeline Labor Materials

Gas Sales Hot tap and meter skid

Total

93000

205200

42000

66000

35000

50000

7500

6000

35000

539700

Estimated Construction Days

Prepared By Earl Landrv

25

SI

Date 19-Jan-09

Project

Location

Field

AFE

Estimated Intangibles Expenses

Tangibles total

Contingencies 20% 146900

Grand Total 881500

Reviewed By Brennan Disher



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II

October 28 2008

MEMO TO PARTNERS

Re Virgin Offshore USA Inc S.L 18165 Sidetrack Empire ProspectPlaquemines Parish Louisiana

Ladies and Gentlemen

The following is brief summary of the results obtained in the drilling of the above

referenced well have tried to provide daily updates throughout last week as weencountered the objective Sands have attached an annotated LWD 100 true

vertical depth log over these objective Sands Each of objective sands came in as

mapped expected and are productive with the exception of the Sand which showedresidual

gas saturations probabjy as result of cross fault drainage

The subject well reached its planned total depth of 11860 MD 9537 TVD October22 2008 5/8 production casing has been successfully run to total depth and cemented

in place We are currently laying down drill pipe and will release the drilling rig over the

course of the next few days completion procedure is currently being planned

designed and will be implemented with work-over completion rig much more costeffective and efficient method Current plans are to dually complete the well i.e two

tubing strings in the well bore with primary completion in each string producing

simultaneously andselective

completionin

each string which allows for immediateproduction of an up-hole zone immediately upon the depletion of the primary completion

Once this procedure has been finalized and costs estimated we will immediately forward

same to you Included in these costs will be the installation of production facility

including tank battery for the storing of oil and gas line less than 100 yards to our

gas market Obviously we intend to expedite the completion first production of the

well Our goal is to have the well on-line within 90 days

As stated above we intend to dually complete the well to maximize cash flow and

expedite depletion of the reserves t o a id the present worth profiles on the reserves While

more costly on the front-end it is tremendous boost to economics My current thoughtson this dual are as follows

Long String

Primary Completion K-6 Sand Estimated rate .75MMCFGD 25BCPDSelective Completion K-5 Sand Lwr Estimated rate .75MMCFGD 75BCPD

Short String

Primary Completion K-5 Sand Upr Estimated rate 25OBOPDSelective Completion K-2B Sand Estimated rate 25OBOPD



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Consequently our initial rate would be estimated to be .75MMCFGD 375B0PD At currentpricing and after lease operating expenses initial monthly net cash flow from the well is estimated tobe $750000.00 This would provide an extraordinary rate of return on Our investment Please keepin mind that these rates are my estimates and are subject to change upward or downward as we testthe zones do believe them to be reasonable estimates based on my knowledge of the offset

productionin the Empire Field and interpretation of the well logs Upon depletion of the Primary

and Selective Completions in both strings the well would be worked-over to capture reserves in the

K-2A and possible reserves in the K-i Sand

My current estimates of reserves are as followsProved 3.5 BCFG 500 MBO

Possible 1.0 BCFG 400 MBO

The Proved reserves would yield estimated future net revenue under current pricing of

approximately $3 8MM undiscounted and before lease operating expenses These future revenueswould provide nice multiple on the investment Obviously the reservoir engineers will have the

final say on reserves but feel these estimates are reasonable

Sincerely

Charlie Roberts

Exploration Manager


Montecito Exhibit b to Supplement

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Transcript of Montecito Exhibit b to Supplement