Evaluation

2B
2-11-2016
Management - $$$
Engineer – Cost vs. Reserves vs. Risk = ROI – Time Value of Money
Accounting – Costs – Partners

It doesn’t matter if you’re a factory producing widgets or and oil

company producing oil and gas, we’re in this to make $$$.

The biggest challenge in oil & gas exploration is managing risk.

 Classification of Reserves vs. Risk
DEFINITIONS OF RESERVES

PROVED RESERVES

Proved reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and operating conditions. Proved reserves are limited to those quantities of oil and gas which can be
expected, with little doubt, to be recoverable commercially at current prices and costs, under regulatory practices and with existing conventional equipment and operating methods.

Proved developed producing reserves are those reserves which are expected to be produced from existing completion intervals open for production, at the "as of date" of this
report. (90-100% Certainty)

Proved developed non-producing reserves are (1) those reserves expected to be produced from existing completion intervals in existing wells, but due to pending pipeline
connections or other mechanical or contractual requirements, hydrocarbon sales have not yet commenced, and (2) other non-producing reserves which exist behind casing of
existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making
such oil and gas available for production should be relatively small compared to the cost of a new well. (+/- 75% Certainty)

Proved undeveloped reserves are those reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major
expenditure is required for recompletion. Proved reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production
when drilled. (+/- 50% Certainty)

PROBABLE RESERVES

Probable reserves are those reserves which geological and engineering data demonstrate to be potentially recoverable, but where some element of risk or insufficient data prevent
classification as proved. (+/-25% Certainty)

POSSIBLE RESERVES

Possible reserves are those speculative reserves estimate beyond proved and probable reserves where geologic and engineering data suggest the presence of additional reserves, but
where the risk is relatively high. (+/- 15% Certainty)
4. Engineers shall not disclose, without consent, confidential
information concerning the business affairs or technical processes
of any present or former client or employer, or public body on
which they serve.
a. Engineers shall not, without the consent of all interested parties,
promote or arrange for new employment or practice in connection
with a specific project for which the engineer has gained particular
and specialized knowledge.
b. Engineers shall not, without the consent of all interested parties,
participate in or represent an adversary interest in connection with
a specific project or proceeding in which the engineer has gained
particular specialized knowledge on behalf of a former client or
employer.

5. Engineers shall not be influenced in their professional duties by

conflicting interests.
a. Engineers shall not accept financial or other considerations,
including free engineering designs, from material or equipment
suppliers for specifying their product.
b. Engineers shall not accept commissions or allowances, directly or
indirectly, from contractors or other parties dealing with clients or
employers of the engineer in connection with work for which the
engineer is responsible.

“Ride for the Brand”

 INVESTMENT RISK
(GAMBLER’S RUIN) ANALYSIS

What Is Gambler’s Ruin?

An important concern of investors, especially in a high-risk industry such as petroleum exploration, is the possibility of going broke through continuous failure. This risk
is similar to gambling and is called “gambler’s ruin.” This tool analyzes the possibility of gambler’s ruin and estimates the minimum acceptable probability of success
and the capital required to avoid the risk of gambler’s ruin.
Investment risk analysis involves these basic parameters:
¨ Risk money (X) = the money loss for each failure (e.g. dry-hole drilling)
¨ Potential value of the reward (R) = the commercial value of each success
¨ Amount of available capital (C) = total investment or available funding for the adventure
¨ Probability of success of the venture (P) = estimated success rate
¨ Acceptable risk level (am) = the acceptable level of risk (i.e., the probability of going broke through continuous failure)
Based on the gambler’s ruin theory presented by Arps and Arps, the minimum acceptable probability (Pm) of success for the venture breaking even in the long run is:

 1n(1  R / C  X / C) 1
Pm  1  
 1n(1  X / C)

and the chance (a) of an investor going broke through a continuous string of failures is:
a  (1  P) c/x ___
The investment analysis tool will tell the user the
¨ Minimum acceptable probability of success
¨ Chance of going broke
¨ Minimum acceptable probability of success in order to meet the acceptable risk level
 Series1
North King Camp Devonian Series4
Series7
Series10
Series13
Series16
Series19
Series22
Series25
Series28
Series31
Series34
Series37
Series40
Series43 Volumetric
-5680
-5700 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47
Series46
Model
-5720
-5740
-5760
-5780
-5800
-5820
-5840
-5860
-5880
-5900
-5920
-5940
-5960
-5980
-6000
-6020
-6040
-6060
-6080
-6100
-6120
-6140
-6160
-6180
-6200
-6220
-6240 -6240--6220 -6220--6200 -6200--6180 -6180--6160 -6160--6140 -6140--6120 -6120--6100 -6100--6080 -6080--6060 -6060--6040
-6040--6020 -6020--6000 -6000--5980 -5980--5960 -5960--5940 -5940--5920 -5920--5900 -5900--5880 -5880--5860 -5860--5840
-5840--5820 -5820--5800 -5800--5780 -5780--5760 -5760--5740 -5740--5720 -5720--5700 -5700--5680
 Expected Monetary Value (EMV)
3-D Seismic Structure @ 8,000'
Possible Acts - Net Revenue
Possible Reserves Probability Well Don't Drill Drill Farmout
Events BOE Factor Cost Drill 100% 50% 1/8 ORRI
Dry Hole - 40.000% $ 420,000 $ (50,000) $ - $ - $ 50,000
50,000 4.000% $ 82,000 $ - $ 72,000 $ 36,000 $ 13,500
75,000
100,000
150,000
5.000% $
6.000% $
7.000% $
102,500 $
123,000 $
143,500 $
- $ 135,000 $
- $ 216,000 $
- $ 378,000 $
67,500 $
108,000 $
189,000 $
25,313
40,500
70,875
Return on
Investment
200,000 8.000% $ 164,000 $ - $ 576,000 $ 288,000 $ 108,000
300,000 7.000% $ 143,500 $ - $ 756,000 $ 378,000 $ 141,750
400,000 6.000% $ 123,000 $ - $ 864,000 $ 432,000 $ 162,000
500,000 5.000% $ 102,500 $ - $ 900,000 $ 450,000 $ 168,750
600,000 4.000% $ 82,000 $ - $ 864,000 $ 432,000 $ 162,000
700,000 3.000% $ 61,500 $ - $ 756,000 $ 378,000 $ 141,750
800,000 2.500% $ 51,250 $ - $ 720,000 $ 360,000 $ 135,000
900,000 1.500% $ 30,750 $ - $ 486,000 $ 243,000 $ 91,125
1,000,000 1.000% $ 20,500 $ - $ 360,000 $ 180,000 $ 67,500

100.000% $ 1,650,000 $ (50,000) $ 7,083,000 $ 3,541,500 $ 1,378,063

ROI 4.29 4.35 27.56
to 1 to 1 to 1
Vertical Well
Land Cost= $50,000
Bonus= $100,000
Dry Hole Cost= $1,000,000
Producing Well Cost= $2,000,000
W.I. Royalty
BOE Gross= $60.00 $60.00
Taxes 10%= -$6.00 -$6.00
Royalty 20%= -$12.00
LOE 10%= ______-$6.00__________
Net Value= $36.00 $54.00
 Expected Monetary Value (EMV)
Bone Spring Horizontal -10,000'+5000'
Possible Acts - Net Revenue

Possible
Events

Dry Hole
Reserves
BOE

-
Probability
Factor

5.000% $
Well
Cost

200,000 $
Don't
Drill

(500,000) $
Drill
100%

- $
Drill
50%

- $
Farmout
1/8 ORRI

500,000
Return on
50,000

75,000
10.000% $

10.000% $
800,000

800,000
$

$
-

-
$

$
180,000

270,000
$

$
90,000

135,000
$

$
33,750

50,625
Investment
100,000 10.000% $ 800,000 $ - $ 360,000 $ 180,000 $ 67,500

150,000 10.000% $ 800,000 $ - $ 540,000 $ 270,000 $ 101,250

200,000

300,000
10.000% $

10.000% $
800,000

800,000
$

$
-

-
$

$
720,000

1,080,000
$

$
360,000

540,000
$

$
135,000

202,500
Horizontal
400,000

500,000
10.000% $

10.000% $
800,000

800,000
$

$
-

-
$

$
1,440,000

1,800,000
$

$
720,000

900,000
$

$
270,000

337,500
Bone Spring
600,000

700,000
6.000% $

5.000% $
480,000

400,000
$

$
-

-
$

$
1,296,000

1,260,000
$

$
648,000

630,000
$

$
243,000

236,250
Well
800,000 2.500% $ 200,000 $ - $ 720,000 $ 360,000 $ 135,000

900,000 1.000% $ 80,000 $ - $ 324,000 $ 162,000 $ 60,750

1,000,000 0.500% $ 40,000 $ - $ 180,000 $ 90,000 $ 33,750

100.000% $ 7,800,000 $ (500,000) $ 10,170,000 $ 5,085,000 $ 2,406,875

ROI 1.30 1.56 4.81
to 1 0 to 1
Land Cost= $500,000
Bonus (50%)= $1,000,000
Dry Hole Cost= $3,500,000
Producing Well Cost= $7,500,000
W.I. Royalty
BOE Gross= $60.00 $60.00
Taxes 10%= -$6.00 -$6.00
Royalty 20%= $12.00
LOE 10%= ______________-$6.00 ________________
Net Value= $36.00 $54.00
 MONTE CARLO SIMULATION
What Is a Monte Carlo Simulation?
A Monte Carlo simulation is used to solve certain stochastic (involving a random variable) problems where the passage of time plays no
substantive role. It is widely used to solve certain statistical problems that are not analytically tractable. The simulation requires that a mathe-
matical relationship (model) be established between the event outcome (expectation) and influence factors (input variables). For example, to
estimate the expectation of an outcome function g(X), where X = (x1, x2, … xn) denotes input variables, the simulation is used to estimate the
expectation E[g(X)]. First, a sequence of N random vectors X(k) = (x1(k) , x2(k) , … xn(k) ) where k=1, … N, are generated according to the
probability distribution function, then the random variable Y(k) = g(X(k) ) for each k is computed. Using N sample points, the expectation is
approximated by
(Y (1)
...Y (N )
)
E [ g ( X )]  E (Y )  lim
N  N
Limitations. Monte Carlo is a random sampling method and requires a large sampling number N for accurate estimates. As a result, the method
converges slowly. Its long computing time prohibits its application in reservoir simulation. Also, the large number of random samples of the input
distribution used in the method tends to give a higher variance for the estimates and hence increases the uncertainty for the expected outcomes.
Managing Limitations. Several variance reduction techniques have been used to reduce the number of samples and better represent the variance.
This software offers both Latin hypercube (LHC) and random (MC) sampling methods. The LHC sampling method reduces the number of samples
and variance. In LHC, the range of each variable is divided into nonoverlapping intervals (m) on the basis of equal width or equal probability. These
intervals are sampled according to probability density functions associated with the variables. Rather than sampling all possible combinations, the
method selects only m of these combinations. Each stratum of each variable is only sampled once without replacement. Thus, the full range of
each input variable is sampled. This can significantly improve the accuracy and convergence rate.
For the distribution function you chose, enter the characterization parameters in the corresponding cell of columns 5–7 as:
¨ Crisp (a) a is a parameter
¨ Uniform (a, b) a = minimum value, b = maximum value
¨ Lognormal (a, b) a = mean, b = standard deviation
¨ Triangular (a, b, c) a = minimum, b = most likely, c = maximum
¨ Normal (a, b) a = mean, b = standard deviation
¨ Loguniform (a, b) a = minimum value, b = maximum value
¨ Exponential (a) a = mean value
¨ Weibull (a, b) a and b are parameters
EXPECTED OIL FIELD MONETARY VALUE
The example uses a Monte Carlo simulation to evaluate the expected monetary value (EMV) of the North King Camp oil
field. The EMV is calculated by:

EMV = 7758 * x1 * x2 * x3 * x4 * x5 *(1 – x6)/x7

where:
x1 (oil price in dollars) Triangular distribution with parameters (25.0, 30.0, 40.0)
x2 (recovery factor) Triangular distribution with parameters (0.3, 0.4, 0.5)
x3 (area in acres) Lognormal distribution with parameters (320.0, 160.0, 0.0, )
x4 (pay thickness in feet) Lognormal distribution with parameters (30.0, 15.0, 0.0)
x5 (porosity) Normal distribution with parameters (0.07, 0.08, 0.00)
x6 (water saturation) Uniform distribution with parameters (0.2, 0.25)
x7 (FVF) Crisp distribution with parameters (1.05)
Assume there is rank correlation between variables x5 and x6 with a rank correlation coefficient = 0.5.
 ARTIFICIAL NEURAL NETWORKS
What Are Artificial Neural Networks?
Artificial neural networks (ANNs) are systems that are constructed to use some
organizational principles resembling those of the human brain. They are a new
generation of information processing systems that demonstrate the ability to learn,
recall, and generalize from training patterns or data. ANNs are good at tasks such as
pattern matching and classification, data clustering, and forecasting.
This type of software uses the backpropagation neural network (BPN), the most
widely used feedforward neural network system. The term backpropagation refers to
the training method by which the weights of the network connection are adjusted. The
calculations procedure is feedforward, from input layer through hidden layers to
output layer. During training, the calculated outputs are compared with the desired
values, and then the errors are backpropagated to correct all weight factors.
Neural Network Structures
The structure of the neural network is defined by the interconnection architecture between the processing elements. The basic types of structures are feedforward and recurrent nets.
Others are combinations of these two types.

X1 Y1

X2 Y2

X3 Y3

Input Hidden Output

layer layer layer
Multilayer Feedforward Network

X1 Y1

X2 Y2

X3 Y3

Multilayer Recurrent Network

 Time Value of Money

Time Value of Money

BOE
(Discounted Cash Flow - Present Worth - Net Present Value) A constant percentage
100,000
Decline % 15% decline rate is a straight
Net Value 10%
line on a Log scale.
at (Discounted Cash Flow or Present Worth)
Discounted
Year BOE $36/BOE Cash Flow DCF/NCF

1 36,500 $1,314,000 $1,252,850 95.3% Net Present Value (NPV)

2 31,025 $1,116,900 $968,111 86.7% 10,000 The NPV is the present value of all
future returns discounted back to
3 26,371 $949,365 $748,086 78.8% time zero at the average
opportunity rate of the Company.
4 22,416 $806,960 $578,066 71.6% The average opportunity rate (io) is
normally 7-12%; 10% is commonly
used In planning.
5 19,053 $685,916 $446,688 65.1%

6 16,195 $583,029 $345,168 59.2% 1,000

0 5 10 15 20
NPV = I1/(1+io)0.5+
7 13,766 $495,574 $266,721 53.8%
I2/(1+io)1.5 + I3/(1+io)2.5 +
8 11,701 $421,238 $206,102 48.9%
NCF vs. DCF I4/(1+io)3.5 …. + In/(1+io)n-0.5
9 9,946 $358,053 $159,261 44.5% $1,400,000
10 8,454 $304,345 $123,065 40.4%
11 7,186 $258,693 $95,096 36.8% $1,200,000 In = Net income, Annual
12 6,108 $219,889 $73,483 33.4% NCF
13 5,192 $186,906 $56,782 30.4% $1,000,000
DCF
io = Opportunity Rate
14 4,413 $158,870 $43,877 27.6%
15 3,751 $135,039 $33,905 25.1%
$800,000
n = nth Year
16 3,188 $114,783 $26,199 22.8% $600,000
17 2,710 $97,566 $20,245 20.8%
18 2,304 $82,931 $15,644 18.9% $400,000
19 1,958 $70,491 $12,088 17.1%
20 1,664 $59,918 $9,341 15.6% $200,000

$0
0 5 10 15 20
233,902 $8,420,467 $5,480,780
 OGRE(R) V2.6 BTAX D A T A R E P O R T DATE: 02/08/16
FILE NAME: NMT ( 2) - - - - - - - - - - TIME: 07:23:06
CASE NAME: -NM-KING CAMP NORTH -ANCHOR DEEP UNIT -1 -9K 14S 29E NE S
101 ANCHOR DEEP UNIT 1
102 CHAVES COUNTY, NM
103 KING CAMP NORTH FIELD
104 CIMARRON EXPLORATION COMPANY

117 CASE $COM

* 120 1 1988 12 1 1 1988 10 M

W.I. OP. COST OP. COST ADV. TAX MAJOR PROD DATE
FRACTION ($/W/MO) ($/MO.) (PCT) PH. NAME (MO/DY/YR)
-------- -------- -------- -------- -------- ----------
210 1.00000000 5000.00 .00 .000 OIL 9/01/1989

PHASE CUM PROD REV. INT PRICE SEV. TAX NO. OF RATIO TO
NAME (MUNITS) FRACTION ($/UNIT) (PCT) WELLS MAJOR PH
-------- -------- -------- -------- -------- -------- --------
221 OIL .000 .80000000 60.000 8.950 1.0
223 WATER .000 1.00000000 -2.000 .000 .0

PH. NAME CURVE TP DECLINE% QI RATE QT RATE CUM. LIMIT (M OR Y) CALC VALUE
-------- -------- -------- -------- -------- -------------------- -------- --------------------
410 OIL FLAT .000 1500.000 X 68.000 IMOS M
CALC OIL FLAT END= .000 1500.000 1500.000 7.333 YRS M 102.000 MBBL
411 OIL EXP 25.000 5000.000 X 33.000 IMOS M
CALC OIL EXP END= 25.000 5000.000 2266.671 10.083 YRS M 216.015 MBBL
412 OIL EXP 10.000 LAST X 36.000 IMOS M
CALC OIL EXP END= 10.000 2266.671 1652.403 13.083 YRS M 285.976 MBBL
413 OIL 350.000 90.000 4000.000 X 6.000 % M
CALC OIL 350.000END= 6.000 4000.000 1423.276 17.577 YRS M 388.049 MBBL
414 OIL EXP 6.000 LAST 500.000 X X M
CALC OIL EXP END= 6.000 1423.276 500.000 34.484 YRS M 567.107 MBBL
430 WATER FLAT .000 1.000 X 90.000 IMOS M
CALC WATER FLAT END= .000 1.000 1.000 9.167 YRS M .090 M -UNITS
431 WATER EXP X 2500.000 30000.000 414.000 LINE M
CALC WATER EXP END= -10.313 2500.000 30000.000 34.484 YRS M 3362.213 M -UNITS

INV NAME INV. POINT (G OR N) TANG-M$ INTANG-M$ LSEHLD-M$ RISK FRAC OVHD FLAG
-------- -------------------- -------- ------- --------- --------- --------- ---------
801 INVEST -1.000 MOS G 1000.000 2000.000 50.000

FOOTNOTES:
----------
905 CUM OIL PROD AS OF 11 1 2015 = 516012
906 CUM GAS PROD AS OF 11 1 2015 = 0.00
909 1300220050043335980
910 9K 14S 29E NE SW

ECONOMIC LIFE (YRS): 27.000

GROSS OIL (MBBL): 510.002
GROSS WATER (MU): 1453.995
ANCHOR DEEP UNIT 1 DATE: 02/08/16
CHAVES COUNTY, NM TIME: 07:23:06
KING CAMP NORTH FIELD FILE: NMT
CIMARRON EXPLORATION COMPANY PROP: 2
R E S E R V E S A N D E C O N O M I C S STID: BASE
- - - - - - - - - - - - - - - - - - - - .CMD: ACTIVE:
.OUT: SAMPLE

AS OF JANUARY 1, 1988

---PRICES--- --------OPERATIONS, M$-------- 10.00 PCT

-END- ---GROSS PRODUCTION--- ----NET PRODUCTION---- OIL GAS NET OPER SEV+ADV NET OPER CAPITAL CASH FLOW CUM. DISC
MO-YR OIL, MBBL GAS, MMCF OIL, MBBL GAS, MMCF $/B $/M REVENUES TAXES EXPENSES COSTS, M$ BTAX, M$ BTAX, M$
----- ---------- ---------- ---------- ---------- ------ ----- --------- -------- --------- --------- --------- ---------
12-88 .000 .000 .000 .000 60.00 .00 .000 .000 .000 .000 .000 .000
12-89 6.000 .000 4.800 .000 60.00 .00 287.992 25.776 20.000 3050.000 -2807.784 -2419.393
12-90 18.000 .000 14.400 .000 60.00 .00 863.976 77.328 60.000 .000 726.648 -1846.805
12-91 18.000 .000 14.400 .000 60.00 .00 863.976 77.328 60.000 .000 726.648 -1326.270
12-92 18.000 .000 14.400 .000 60.00 .00 863.976 77.328 60.000 .000 726.648 -853.057

12-93 18.000 .000 14.400 .000 60.00 .00 863.976 77.328 60.000 .000 726.648 -422.863
12-94 18.000 .000 14.400 .000 60.00 .00 863.976 77.328 60.000 .000 726.648 -31.778
12-95 42.398 .000 33.918 .000 60.00 .00 2035.056 182.140 60.000 .000 1792.916 845.455
12-96 43.041 .000 34.433 .000 60.00 .00 2065.956 184.905 60.000 .000 1821.051 1655.454
12-97 32.282 .000 25.826 .000 60.00 .00 1497.454 138.686 60.000 .000 1298.768 2180.625

12-98 26.061 .000 20.849 .000 60.00 .00 1182.524 111.959 60.000 .000 1010.565 2552.110
12-99 23.439 .000 18.751 .000 60.00 .00 1049.588 100.693 60.000 .000 888.895 2849.163
12-00 21.096 .000 16.877 .000 60.00 .00 929.364 90.629 60.000 .000 778.735 3085.745
12-01 31.412 .000 25.130 .000 60.00 .00 1415.956 134.948 60.000 .000 1221.008 3422.968
12-02 23.527 .000 18.822 .000 60.00 .00 1028.006 101.074 60.000 .000 866.932 3640.634

12-03 20.307 .000 16.246 .000 60.00 .00 862.998 87.241 60.000 .000 715.757 3804.007
12-04 18.448 .000 14.758 .000 60.00 .00 762.192 79.250 60.000 .000 622.942 3933.268
12-05 17.172 .000 13.738 .000 60.00 .00 688.276 73.773 60.000 .000 554.503 4037.868
12-06 16.133 .000 12.906 .000 60.00 .00 624.330 69.305 60.000 .000 495.025 4122.759
12-07 15.166 .000 12.133 .000 60.00 .00 562.478 65.154 60.000 .000 437.324 4190.937

12-08 14.256 .000 11.405 .000 60.00 .00 501.728 61.245 60.000 .000 380.483 4244.861
12-09 13.400 .000 10.720 .000 60.00 .00 441.802 57.566 60.000 .000 324.236 4286.636
12-10 12.596 .000 10.077 .000 60.00 .00 382.450 54.113 60.000 .000 268.337 4318.066
12-11 11.841 .000 9.473 .000 60.00 .00 323.296 50.870 60.000 .000 212.426 4340.685
12-12 11.130 .000 8.904 .000 60.00 .00 263.882 47.814 60.000 .000 156.068 4355.793

12-13 10.462 .000 8.370 .000 60.00 .00 203.960 44.947 60.000 .000 99.013 4364.506
12-14 9.835 .000 7.868 .000 60.00 .00 143.082 42.251 60.000 .000 40.831 4367.773

S TOT 510.002 .000 408.004 .000 60.00 .00 21572.250 2190.979 1520.000 3050.000 14811.271 4367.773

REM. .000 .000 .000 .000 .00 .00 .000 .000 .000 .000 .000 4367.773

TOTAL 510.002 .000 408.004 .000 60.00 .00 21572.250 2190.979 1520.000 3050.000 14811.271 4367.773

CUM. .000 .000 NET OIL REVENUES (M$) 24480.240 ---------PRESENT WORTH PROFILE---------
NET GAS REVENUES (M$) .000 DISC PW OF NET DISC PW OF NET
ULT. 510.002 .000 TOTAL REVENUES (M$) 21572.250 RATE BTAX, M$ RATE BTAX, M$
---- --------- ---- ---------
BTAX RATE OF RETURN (PCT) 31.92 PROJECT LIFE (YEARS) 27.000 .0 14811.271 30.0 113.206
BTAX PAYOUT 11/12/1993 DISCOUNT RATE (PCT) 10.000 2.0 11443.763 35.0 -180.914
BTAX PAYOUT (DISC) 01/14/1995 GROSS OIL WELLS 1.000 5.0 7898.348 40.0 -376.075
BTAX NET INCOME/INVEST 5.86 GROSS GAS WELLS .000 8.0 5523.388 45.0 -506.459
BTAX NET INCOME/INVEST (DISC) 2.67 GROSS WELLS 1.000 10.0 4367.773 50.0 -593.340
12.0 3454.691 60.0 -686.586
INITIAL W.I. FRACTION 1.000000 INITIAL NET OIL FRACTION .800000 15.0 2416.424 70.0 -719.069
FINAL W.I. FRACTION 1.000000 FINAL NET OIL FRACTION .800000 18.0 1660.644 80.0 -720.496
PRODUCTION START DATE 9/01/89 INITIAL NET GAS FRACTION .000000 20.0 1269.612 90.0 -705.813
MONTHS IN FIRST LINE 12.00 FINAL NET GAS FRACTION .000000 25.0 563.406 100.0 -682.928

WATER GROSS PROD. (MU) 1453.995 WATER NET PRODUCTION (MU) 1453.995 WATER NET REVENUES (M$) -2907.990
OGRE(R) V2.6 BTAX D A T A R E P O R T DATE: 02/08/16
FILE NAME: NMT ( 1) - - - - - - - - - - TIME: 07:23:06
CASE NAME: -NM-KING CAMP NORTH -ANCHOR DEEP UNIT -2 -9J 14S 29E NW S
101 ANCHOR DEEP UNIT 2
102 CHAVES COUNTY, NM
103 KING CAMP NORTH FIELD
104 CIMARRON EXPLORATION COMPANY

117 CASE $COM

* 120 1 1988 12 1 1 1988 10 M

W.I. OP. COST OP. COST ADV. TAX MAJOR PROD DATE
FRACTION ($/W/MO) ($/MO.) (PCT) PH. NAME (MO/DY/YR)
-------- -------- -------- -------- -------- ----------
210 1.00000000 5000.00 .00 .000 OIL 10/01/1988

PHASE CUM PROD REV. INT PRICE SEV. TAX NO. OF RATIO TO
NAME (MUNITS) FRACTION ($/UNIT) (PCT) WELLS MAJOR PH
-------- -------- -------- -------- -------- -------- --------
221 OIL .000 .80000000 60.000 8.950 1.0
223 WATER .000 1.00000000 -2.000 .000 .0

PH. NAME CURVE TP DECLINE% QI RATE QT RATE CUM. LIMIT (M OR Y) CALC VALUE
-------- -------- -------- -------- -------- -------------------- -------- --------------------
410 OIL EXP 20.000 8000.000 950.000 X X M
CALC OIL EXP END= 20.000 8000.000 950.000 10.299 YRS M 379.128 MBBL
430 WATER EXP X 100.000 20000.000 410.000 LINE M
CALC WATER EXP END= -74.172 100.000 20000.000 10.299 YRS M 430.369 M-UNITS

INV NAME INV. POINT (G OR N) TANG-M$ INTANG-M$ LSEHLD-M$ RISK FRAC OVHD FLAG
-------- -------------------- -------- ------- --------- --------- --------- ---------
801 INVEST -1.000 MOS G 1000.000 1000.000 50.000

FOOTNOTES:
----------
905 CUM OIL PROD AS OF 08 1 1999 = 347724
906 CUM GAS PROD AS OF 08 1 1999 = 5823
909 1300220056263235980
910 9J 14S 29E NW SE
ANCHOR DEEP UNIT 2 DATE: 02/08/16
CHAVES COUNTY, NM TIME: 07:23:06
KING CAMP NORTH FIELD FILE: NMT
CIMARRON EXPLORATION COMPANY PROP: 1
R E S E R V E S A N D E C O N O M I C S STID: BASE
- - - - - - - - - - - - - - - - - - - - .CMD: ACTIVE:
.OUT: SAMPLE

AS OF JANUARY 1, 1988

---PRICES--- --------OPERATIONS, M$-------- 10.00 PCT

-END- ---GROSS PRODUCTION--- ----NET PRODUCTION---- OIL GAS NET OPER SEV+ADV NET OPER CAPITAL CASH FLOW CUM. DISC
MO-YR OIL, MBBL GAS, MMCF OIL, MBBL GAS, MMCF $/B $/M REVENUES TAXES EXPENSES COSTS, M$ BTAX, M$ BTAX, M$
----- ---------- ---------- ---------- ---------- ------ ----- --------- -------- --------- --------- --------- ---------
12-88 23.343 .000 18.674 .000 60.00 .00 1119.796 100.279 15.000 2050.000 -1045.483 -999.653
12-89 81.375 .000 65.100 .000 60.00 .00 3902.314 349.587 60.000 .000 3492.727 2027.787
12-90 65.099 .000 52.079 .000 60.00 .00 3118.322 279.664 60.000 .000 2778.658 4217.330
12-91 52.080 .000 41.664 .000 60.00 .00 2488.660 223.736 60.000 .000 2204.924 5796.829
12-92 41.664 .000 33.331 .000 60.00 .00 1980.386 178.987 60.000 .000 1741.399 6930.876

12-93 33.331 .000 26.665 .000 60.00 .00 1565.984 143.191 60.000 .000 1362.793 7737.684
12-94 26.665 .000 21.332 .000 60.00 .00 1220.846 114.553 60.000 .000 1046.293 8300.804
12-95 21.332 .000 17.066 .000 60.00 .00 921.072 91.644 60.000 .000 769.428 8677.267
12-96 17.065 .000 13.652 .000 60.00 .00 639.916 73.311 60.000 .000 506.605 8902.604
12-97 13.653 .000 10.922 .000 60.00 .00 343.196 58.651 60.000 .000 224.545 8993.401

12-98 3.521 .000 2.817 .000 60.00 .00 36.890 15.127 17.923 .000 3.840 8994.861

S TOT 379.128 .000 303.302 .000 60.00 .00 17337.382 1628.730 572.923 2050.000 13085.729 8994.861

REM. .000 .000 .000 .000 .00 .00 .000 .000 .000 .000 .000 8994.861

TOTAL 379.128 .000 303.302 .000 60.00 .00 17337.382 1628.730 572.923 2050.000 13085.729 8994.861

CUM. .000 .000 NET OIL REVENUES (M$) 18198.120 ---------PRESENT WORTH PROFILE---------
NET GAS REVENUES (M$) .000 DISC PW OF NET DISC PW OF NET
ULT. 379.128 .000 TOTAL REVENUES (M$) 17337.382 RATE BTAX, M$ RATE BTAX, M$
---- --------- ---- ---------
BTAX RATE OF RETURN (PCT) 100.00 PROJECT LIFE (YEARS) 10.299 .0 13085.729 30.0 4983.725
BTAX PAYOUT 04/19/1989 DISCOUNT RATE (PCT) 10.000 2.0 12071.931 35.0 4399.742
BTAX PAYOUT (DISC) 04/30/1989 GROSS OIL WELLS 1.000 5.0 10756.743 40.0 3910.744
BTAX NET INCOME/INVEST 7.38 GROSS GAS WELLS .000 8.0 9643.956 45.0 3496.853
BTAX NET INCOME/INVEST (DISC) 5.68 GROSS WELLS 1.000 10.0 8994.861 50.0 3143.147
12.0 8408.872 60.0 2573.417
INITIAL W.I. FRACTION 1.000000 INITIAL NET OIL FRACTION .800000 15.0 7631.295 70.0 2137.795
FINAL W.I. FRACTION 1.000000 FINAL NET OIL FRACTION .800000 18.0 6956.360 80.0 1796.517
PRODUCTION START DATE 10/01/88 INITIAL NET GAS FRACTION .000000 20.0 6554.706 90.0 1523.688
MONTHS IN FIRST LINE 12.00 FINAL NET GAS FRACTION .000000 25.0 5689.648 100.0 1301.852

WATER GROSS PROD. (MU) 430.369 WATER NET PRODUCTION (MU) 430.369 WATER NET REVENUES (M$) -860.738
 Evaluation
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2-18-2016
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Risk
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Time Value of Money
“Black Swans”