Effect of New SEC Rules on Coal Gas Reserves

1
Effect of New SEC Rules on Coal Gas Reserves

• SPEE Annual Meeting
• Santa Fe, New Mexico
• June 15, 2009

John Seidle/Leslie OConnor MHA Petroleum
Consultants
2
Three Examples of New SEC Disclosure for Coal Gas
Reserves

• Dec 31 vs 12 month average price
• Proved reserves more than one offset away,
  probable and possible reserves included.
• Proved reserves via established, reliable
  technology

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Example 1 Price SensitivityPowder River
Basin/CIG Price

• Companies required to report oil and gas reserves
  using an average price based upon the prior
  12-month period rather than year-end prices.

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Example 1 Price sensitivityCIG Price History

• Dec 31, 2008 price 4.51/mmbtu
• Avg 2008 price 6.70/mmbtu

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Example 1 PRB Coal Well Gas Profile
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Example 1 Price SensitivityPVT Doubles
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Example 2 Proved Reserves More Than One Offset
Away, Probable Possible Reserves Included

• Proved reserves beyond one offset can be claimed
  if company can establish play continuity with
  reasonable certainty and that these reserves are
  economically producible.
• Probable and possible reserve disclosures
  permitted.

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Example 2 Extensive Data Available

• Desorption tests
• Sorption isotherms
• Well tests
• Extensive coring by mining company
• No dry holes

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Example 2 Locations 2009
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Example 2 Locations 2010
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Example 2 Proved Reserves Two Offsets Away
Introduction - 11
12
Example 2 2010/2009 Total Reserves
Introduction - 12
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Example 3 Proved Reserves via Reliable
Technology

• Use of new technologies permitted to determine
  proved reserves if they have been demonstrated
  empirically to lead to reliable conclusions about
  reserves volumes

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CBM Reservoir Issues, as Exemplified by the
Corbett Area, Township 62-6W5

• A Presentation to Alberta EnergySeptember 11,
  2003

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Trident Corbett Project
Corbett
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Corbett CBM Stratigraphy 100/3-14-62-6W5
Jolifou
Mannville
Main Seam

• Cored from 972.7 987.4
• Gas content in Main Seam averages 327 scf/t

Mannville Marker
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Pilot Configuration Confined and Perimeter Wells
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Corbett CBM Production (Total)Cum to 9/1/03 77
MMcf, 78 Mm3
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Corbett Well 15-10-62-06 W5 POWExponential
Integral Pressure Match
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Projected Gas Rates Interior vs. Exterior Wells
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Example 3 Data Suite

• Core
• Desorption tests
• Density, caliper, GR wireline logs
• Sorption isotherms
• Reservoir pressure
• Pilot production 20 months
• Simulator history match forecast

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Example 3 Proved Reserves via Reliable
Technology

• PDP 11
• PUD 23
• Additional reserves to west?

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Effects of new SEC disclosure requirements on CBM
Conclusions - 1

• 11 proposed changes
• Example 1 Dec 31 price vs 12 mon avg price
  PV10 doubles
• Example 2 Proved more than one offset,
  probables possibles PV10 net gas double
• Example 3 Proved via reliable technologies
  addition of 11 PDPs 23 PUDs

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Effects of new SEC disclosure requirements on CBM
Conclusions - 2

• Will allow much higher proved coal gas reserve
  volumes and values
• Reserves determinations will initially be
  confusing to experienced and novice alike
• Expect unconventional gas reserves will grow more
  than conventional reserves