<PAGE>   1
                   [OUTTRIM SZABO ASSOCIATES LTD. LETTERHEAD]



                                                            February 5, 1996



Pennzoil Company
Post Office Box 2967
Houston, Texas
77252-2967


RE:      EVALUATION OF THE PETROLEUM AND NATURAL GAS PROPERTIES OF
         PENNZOIL CANADA, INC. EFFECTIVE DECEMBER 31, 1995


Gentlemen:

                 At your request we have prepared an estimate of the reserves,
future production and income attributable to certain leasehold and royalty
interests of Pennzoil Canada, Inc. hereafter referred to as "the Company" with
an effective date of December 31, 1995.  In accordance with the requirements of
FASB 69, our estimates of the Company's net proved reserves as of December 31,
1993, 1994 and 1995 as contained in this report and our previous reports are
presented in attached Table No. 1 together with a tabulation of the components
of the differences in the estimates as of such date.  The assets evaluated
herein are attributable to the acquisition of Co-enerco Resources Ltd.

                 The estimated reserve volumes and future income amounts
presented in this report are related to hydrocarbon prices.  December 1995
hydrocarbon prices were used in the preparation of this report as required by
Securities and Exchange Commission (SEC) and Financial Accounting Standards
Bulletin No. 69 (FASB 69) guidelines; however, actual future prices may vary
significantly from December 1995 prices.  Therefore, volumes of reserves
actually recovered and amounts of income actually received may differ
significantly from the estimated quantities presented in this report.  Our
estimates of the proved net reserves attributable to the interests of the
Company as of December 31, 1995 are shown below:

<TABLE>
<CAPTION>
                                                   Proved Net Reserves
                                                 as of December 31, 1995     
                                          ------------------------------------
         <S>                              <C>                        <C>
                                          Liquid, Barrels            Gas, MMcf

         Developed and Undeveloped:
            Canada                          9,634,690                 177,987

         Developed:
            Canada                          9,440,904                 173,151
</TABLE>
<PAGE>   2
                                      -2-


                 The "Liquid" reserves shown above are comprised of crude oil,
condensate and natural gas liquids.  Natural gas liquids (excluding condensate)
comprise 6.3 percent of the Company's developed liquid reserves and 6.4 percent
of the Company's developed and undeveloped liquid reserves.  All hydrocarbon
liquid reserves are expressed in standard 42 gallon barrels.  All gas volumes
are hydrocarbon sales gas expressed in MMcf at the pressure and temperature
bases of the area where the gas reserves are located.  In addition, the Company
owns 369 long tons of sulphur reserves as of December 31, 1995 which are not
shown above; however, the revenue from these sulphur reserves is included in
the cash inflow data in this report.

                 The proved reserves presented in this report comply with the
SEC's Regulation S-X Part 210.4-10 Sec. (a) as clarified by subsequent
Commission Staff Accounting Bulletins and are based on the following
definitions and criteria:

                 Proved reserves are those reserves estimated as recoverable
under current technology and anticipated economic conditions, from that portion
of a reservoir which can be reasonably evaluated as economically productive on
the basis of analysis of drilling, geological, geophysical and engineering
data, including the reserves to be obtained by enhanced recovery processes
demonstrated to be economically and technically successful in the subject
reservoir.

                 Proved producing reserves are those reserves that are actually
on production or, if not producing, that could be recovered from existing
developed wells or facilities and where the reasons for the current
non-producing status is the choice of the owner rather than the lack of markets
or some other reasons.  An illustration of such a situation is where a well or
zone is capable but is shut in because its deliverability is not required to
meet contract commitments.

                 Proved non-producing reserves are those developed reserves
that are not currently producing either due to lack of facilities and/or
markets.

                 Proved undeveloped reserves are proved 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.
Reserves on undrilled acreages are limited to those drilling units offsetting
productive units, which are reasonably certain of production when drilled.

                 Due to the direct relationship between volumes of proved
undeveloped reserves and development plans, we include in the proved
undeveloped category only reserves assigned to undeveloped locations that we
have been assured will be drilled.

                 The Company has interests in certain tracts which have been
evaluated as having probable additional hydrocarbon quantities which are not
classified as proved and consequently are not included herein.  Future
development activity may result in these reserves being reclassified as proved.

                 In accordance with the requirements of FASB 69, our estimates
of future cash inflows, future costs and future net cash inflows before income
tax as of December 31, 1995 from this report and as of December 31, 1994 are
presented below.
<PAGE>   3
                                     - 3 -



<TABLE>
<CAPTION>
                                 Total Pennzoil Canada, Inc. as of December 31
                                 ---------------------------------------------
                                       1995            1994        1993
    <S>                             <C>             <C>            <C>
    Future Cash Inflows             345,827,686     393,199,271      0

    Future Costs:
       Production (including
          production taxes)         166,138,400     171,841,724      0
       Development                   10,111,323      11,992,604      0
          Total Costs               176,076,352     183,834,328      0

    Future Net Cash Inflows
       Before Income Tax            169,577,963     209,365,254      0

    Present Value at 10%
       Before Income Tax            117,941,481     147,510,537      0
</TABLE>


                 Our estimates as of December 31, 1995, 1994 and 1993 of future
cash inflows, future costs, future net cash inflows before income tax, and
present value at 10 percent before income tax are shown individually for
Pennzoil Canada, Inc. in Table No. 2, attached hereto.

                 The future cash inflows are gross revenues before any
deductions and include the British Columbia Cost of Service Allowance for
certain Canadian properties.  The production costs were based on current data
and include the operating costs directly applicable to the individual leases or
wells and the Alberta Gas Cost Allowance.  The development costs were based on
current data and include dismantlement and abandonment costs net of salvage for
properties where such costs are relatively significant.

                 In accordance with SEC guidelines, the future gas prices used
in this report make no allowances for future gas price increase which may occur
as a result of inflation nor do they account for seasonal variations in gas
prices which may cause future yearly average gas prices to be somewhat
different than December gas prices.  No gas contract pricing has been used
which would cause future pricing to change from the December 1995 actual
pricing.

                 The Company has provided liquid prices in effect as at
November 30, 1995 and these prices were held constant to depletion of the
properties.  In accordance with SEC guidelines, changes in liquid prices
subsequent to November 30, 1995 were not considered in this report.

                 Operating costs for the leases and wells in this report were
based on the operating expense reports of the Company and include only those
costs directly applicable to the leases or wells.  When applicable, the
operating costs include a portion of general and administrative costs allocated
directly to the leases and wells under terms of operating agreements.
Development costs were furnished to us by the Company and are based on
authorizations for expenditure for the proposed work or actual costs for
similar projects.  In
<PAGE>   4
                                     - 4 -


certain circumstances, Outtrim Szabo was required to develop the capital cost
forecasts for future developments.  The current operating and development costs
were held constant throughout the life of the properties.  For all properties,
the salvage value of the lease equipment or the abandonment cost are relatively
insignificant and tend to offset each other.  No deduction was made for
indirect costs such as general administration and overhead expenses, loan
repayments, interest expenses and exploration and development prepayments.

                 The estimates of reserves presented herein are based upon a
detailed study of the properties in which the Company 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
which may exist nor were any costs included for potential liability to restore
and clean up damages, if any, caused by past operating practices.  The Company
has informed us that they have furnished us all of the accounts, records,
geological and engineering data and reports and other data required for this
investigation.  The ownership interests, prices and other factual data
furnished by the Company were accepted without independent verification.  The
estimates presented in this report are based on data available through December
1995.

                 The reserves included in this report are 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.
Moreover, estimates of reserves may increase or decrease as a result of future
operations.

                 Production forecasts were designed based on contract
information for each area, the future productive capability of each well or
evaluation entity was based on the current capability, various test data
available on the wells, adjacent control wells and similar developments in the
area.

                 While it may reasonably be anticipated that the future prices
received for the sale of production and the operating costs and other costs
relating to such production may also increase or decrease from existing levels,
such changes were, in accordance with rules adopted by the SEC, omitted from
consideration in making this evaluation.

                 Neither we nor any of our employees have any interest in the
subject properties and neither the employment to make this study nor the
compensation is contingent on our estimates or reserves and future cash inflows
for the subject properties.

                                        Yours truly,

                                        OUTTRIM SZABO ASSOCIATES LTD.



                                        /s/ COLIN P. OUTTIM
                                        _______________________________ 
                                            Colin P. Outtrim, P.Eng.  
                                            President


CPO/eb
atts.
<PAGE>   5





                                  TABLE NO. 1

                             PENNZOIL CANADA, INC.
                            Proved Net Reserve Data



<TABLE>
<CAPTION>
                                                                Canada                          
                                                   --------------------------------
                                                    1995          1994(2)      1993
                                                 ---------       --------      ----
<S>                                               <C>            <C>           <C>
NET PROVED LIQUID(1) RESERVES,                                                
THOUSANDS OF BARRELS                                                        
                                                                            
Developed and Undeveloped:                                                  
   Beginning of Period - January 1, 1995          13,910.3       15,882.5        0
      Revisions                                   -1,165.8       -2,008.2        0
    Extensions and Discoveries                     1,360.8        1,094.6        0
    Improved Recovery                                452.4            0          0
    Estimated Production                          -2,380.8       -1,071.0        0
    Purchase of Reserves In-Place                    208.9           44.5        0
    Sales of Reserves In-Place                    -2,751.1          -32.0        0
                                                  --------    -----------       ---
End of Year                                        9,634.7       13,910.3        0
                                                                            
Developed:                                                                  
   Beginning of Period - January 1, 1995          13,710.7       15,352.9        0
End of Year                                        9,439.9       13,710.7        0
                                                             
                                                             
NET PROVED GAS RESERVES,                                     
BILLIONS OF CUBIC FEET                                       
                                                             
Developed and Undeveloped:                                   
   Beginning of Period - January 1, 1995             168.6          159.6        0
    Revisions                                          9.5           -5.9        0
    Extensions and Discoveries                        20.9           23.7        0
    Improved Recovery                                  0.8            0          0
    Estimated Production                             -17.2           -9.4        0
    Purchase of Reserves In-Place                      5.9            3.1        0
    Sales of Reserves In-Place                       -10.5           -2.5        0
                                                     -----        -------      ---
End of Year                                          178.0          168.6        0
                                                                           
Developed:                                                                 
   Beginning of Period                               160.9          152.1        0
 End of Year                                         173.2          160.9        0
</TABLE>                                                     



(1)   Liquid reserves shown above are comprised of crude oil, condensate and
      natural gas liquids.  
(2)   1994 values are as of July 1, 1994, the acquisition date for Co-enerco 
      Resources Ltd.
<PAGE>   6
                                  TABLE NO. 2

                             PENNZOIL CANADA, INC.
                           Cash Inflow and Cost Data
                           (Millions of U.S. Dollars)


<TABLE>
<CAPTION>
                                           As of December 31
                                                 Canada                       
                                     ------------------------------
                                     1995         1994(1)      1993
                                    ------        -------      ----
<S>                                  <C>          <C>          <C>
Future Cash Inflows(2)               345.8         393.2          0
                                                            
Future Costs:                                               
   Production                        166.0         171.8          0
   Development                        10.1          12.0          0
                                     -----         -----       ----
                                                            
Total Costs                          176.1         183.8          0
                                                            
Future Cash Inflows                                         
  Before Income Tax                  169.7         209.4          0
                                                            
Present Value at 10%                                        
  Before Income Tax                  117.9         147.5          0
</TABLE>                                                    




(1)  These assets represent the purchase of Co-enerco Resources Ltd. effective
     July 1, 1994.  
(2)  Gross revenues are before any deductions.  Gross revenues
     include British Columbia Producer Cost of Service Allowance and Alberta Gas
     Cost Allowance.