**EXHIBIT 99.2**

 

January 27, 2005

 

Mr. John Tugwell

Edge PetroleumCorporation

1301 Travis, Suite 2000

Houston, Texas 77002

 
|   | Re:    | Edge Petroleum  Corporation             |
|--------|--------|-----------------------------------------|
|   |   | Mestena Grande  Properties              |
|   |   | “As of” January 1,  2005 |

 

Dear Mr. Tugwell:

 

At your request, we have preparedestimates of the future reserves and projected net revenues for the MestenaGrande Area property interests owned by Edge Petroleum Corporation (Edge), “Asof” January 1, 2005. This report was prepared utilizing spot prices asposted on December 31, 2004, as per SEC guidelines.  The subject properties are located in JimHogg and Brooks.

 

Our conclusions, as January 1,2005, are as follows:

 

| ** **                             | ** ** | **Proved - Net to Edge Petroleum  Company** | ** ** |
|----------------------------------------|------------|---------------------------------------------|------------|
| ** **                             | ** ** | **Proved Developed**                        | ** ** | **Proved** | ** ** | ** ** | ** ** |
| ** **                             | ** ** | **Producing**                               | ** ** | **Undeveloped** | ** ** | **Total** | ** ** |
| **Reserve Estimates**                  |       |                                        |       |   |   |   |   |
| Oil/Cond., Mbbl                        |       | 183.3                                       |       | 107.7 |   | 291.0 |   |
| Gas, MMcf                              |       | 13,430.0                                    |       | 6,489.1 |   | 19,919.1 |   |
| Gas Equivalent, Mmcfe (6:1)            |       | 14,529.6                                    |       | 7,135.5 |   | 21,665.0 |   |
|                                   |       |                                        |       |   |   |   |   |
| **Revenues**                           |       |                                        |       |   |   |   |   |
| Oil, $(8.9)%                           |       | 7,730,034                                   |       | 4,543,875 |   | 12,273,908 |   |
| Gas, $(91.1)%                          |       | 84,668,062                                  |       | 41,118,859 |   | 125,786,914 |   |
| Total, $                               |       | 92,398,102                                  |       | 45,662,734 |   | 138,060,828 |   |
|                                   |       |                                        |       |   |   |   |   |
| **Expenditures**                       |       |                                        |       |   |   |   |   |
| Ad Valorem Tax, $                      |       | 2,194,625                                   |       | 1,096,747 |   | 3,291,372 |   |
| Severance Tax, $                       |       | 4,613,080                                   |       | 1,792,853 |   | 6,405,932 |   |
| Direct Operating Expense, $            |       | 17,323,459                                  |       | 5,489,570 |   | 22,813,029 |   |
| Transportation, $                      |       | 2,840,957                                   |       | 1,384,340 |   | 4,225,296 |   |
| Total, $                               |       | 26,972,119                                  |       | 9,763,511 |   | 36,735,625 |   |
|                                   |       |                                        |       |   |   |   |   |
| **Investments**                        |       |                                        |       |   |   |   |   |
| Total, $                               |       | 0                                           |       | 8,500,761 |   | 8,500,761 |   |
|                                   |       |                                        |       |   |   |   |   |
| **Estimated Future Net Revenues(FNR)** |       |                                        |       |   |   |   |   |
| Undiscounted FNR                       |       | 65,425,969                                  |       | 27,398,467 |   | 92,824,422 |   |
| FNR Disc. @ 10%                        |       | 48,519,859                                  |       | 17,718,230 |   | 66,238,094 |   |

 

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| *Due to computer  rounding, numbers in the above table may not add up exactly. |
|--------------------------------------------------------------------------------|

 

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**Report Qualifications**

 

**Purpose of Report**– The purpose of this report is to provide Edge with a projection of futurereserves and revenues, which can be attributed to the Mestena Grande Area oiland gas properties owned by Edge.

 

**Scope of Work**–W.D. Von Gonten & Co. was engaged by Edge to estimate and project thefuture reserves associated with the various properties included in thisreport.  Once the reserves wereestimated, future revenue projections were made based on a SEC constant pricedeck as requested by Edge.

 

**Reporting Requirements**– Securities and Exchange Commission (SEC) Regulation S-K, Item 102 andRegulation S-X, Rule 4-10, and Financial Accounting Standards Board (FASB)Statement No. 69 require oil and gas reserve information to be reported bypublicly held companies as supplemental financial data. These regulations andstandards provide for estimates of Proved reserves and revenues discounted at10% and based on unescalated prices and costs. Revenues based on escalated product prices may be reported in additionto the current pricing case.  Probablereserves are prohibited from use for SEC reporting purposes and should beexcluded from such filings.

 

The Society of Petroleum Engineers (SPE) requiresProved reserves to be economically recoverable with prices and costs in effecton the “as of” date of the report.  Inaddition, the SPE has issued *Standards Pertaining tothe Estimating and Auditing of Oil and Gas Reserve Information,*whichsets requirements for the qualifications and independence of reserve estimatorsand auditors.

 

The estimated Proved reserves have been prepared inconformance with all SEC, SPE, and World Petroleum Congress (WPC) definitionsand requirements.

 

**Projections**–The attached reserve and revenue projections are on a calendar year basis withthe first time period being January 1, 2005 through December 31,2005.

 

**Reserve Estimates**

 

**MesteñaGrande Area** – The Mesteña Grande Area is located in JimHogg County, Texas with production primarily from the Queen City Sand.  Mesteña Inc. and Edge are the operators ofthe 43 producing wells in the area of which Edge owns an interest.

 

Extrapolation of monthly production histories wasutilized for the estimate of future reserves in wells producing from the QueenCity Formation.  These wells aredeclining in a hyperbolic nature as would be expected from a fractured tite gasreservoir.  This hyperbolic trend hasbeen observed in wells throughout the Queen City Trend, and a decline analogyhas been utilized to aid in projecting remaining reserves.  In some instances it was necessary to alsoadjust initial rates and declines based on daily production data that was morecurrent than the monthly data available through public sources when this reportwas prepared.

 

All projected reserve estimates, for the wells producingfrom the Queen City Sand, were verified for “reasonableness” by overlaying thereserves onto a hydrocarbon pore volume map. W.D. Von Gonten & Co. has prepared this hydrocarbon pore volume mapas part of an extensive field study that we have performed on the Queen CityFormation in the Mesteña Grande Area.

 

Reserveestimates for the Proved Undeveloped locations were based on a combination ofanalogy, volumetrics, and material balance.  Undeveloped locations were assigned in areas that are within the seismicanomaly of “productive area” but outside of the drainage area of the currentproducing wells. Further, recent bottomhole pressure information was evaluatedto verify that the additional reserves were present.

 

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The Queen City is a package of tite gas depletiondrive reservoirs.  The study involvedcorrelating more than 90 digital logs with both conventional and sidewallcores.  This correlation allowed for adepiction of reservoir quality on a well-by-well basis.  Analysis was also done on production testsbefore and after fracture jobs, and completion information in order to betterunderstand the producing characteristics of the sands.  Our conclusions indicate that there is adirect relationship between hydrocarbon pore volume and the productivity of thewells.  Therefore, the proximity ofindividual wells to areas of high hydrocarbon pore volume correlates to theultimate reserves assigned to each well in the Queen City Sand.

 

**Reserves and schedules ofproduction included in this report are only estimates. The amount of availabledata, reservoir and geological complexity, reservoir drive mechanism, andmechanical aspects can have a material effect on the accuracy of these reserveestimates.**

 

**Product Prices**

 

The estimated revenues shown herein were based on theeffective NYMEX prices on December 31, 2004 of $43.46 per barrel of oiland $6.18 per MMBtu of gas.

 

Oil pricing differentials were applied on anindividual property basis to reflect actual prices received at the wellheadversus NYMEX calendar month prices. These differentials were supplied directlyby Edge. Pricing differentials account for transportation and processing costs,geographical differentials, quality adjustments, and any marketing bonus ordeduction.

 

Gas prices have been adjusted according to thepurchase contracts in place for the specific gas stream.  Quality adjustments have been applied basedon actual BTU factors for each well.  Ashrinkage factor has been applied based on production volumes versus actualsales volumes, this shrinkage accounts for any line loss or fuel usage beforethe actual sales point.

 

Where no data was available, estimated differentials,BTU’s, and shrinkages were assigned based on analogy to pricing differentialsutilized in similar producing regions.

 

All prices have been held constant throughout the lifeof the properties.

 

**Operating and Capital Costs**

 

The monthly expense necessary to operate each well wasestimated based on the average of the last 12 month historical Joint InterestBilling Statements as supplied by Edge. These statements date from May 2003 through April 2004.  Edge performed an update of the costinformation with recent data and determined that the cost information is valid.

 

Gas transportation and compression fees were includedas a variable expense and assigned on a per Mcf basis based on contractualagreements.

 

Capital costs necessary to perform drilling, workoverand/or remedial operations were supplied by Edge in the form of detailed AFE’s.

 

All operating and capital costs have been heldconstant throughout the life of the properties.

 

**Other Considerations**

 

**Abandonment Costs** – The costnecessary to abandon the properties were assigned an expense of zero due to thecredit of the salvage value of the surface and subsurface equipment.  This was verified with the abandonment of theLibre Nos. 3 & 5 in 2004.  Both wellswere abandoned and the credit from the equipment exceeded the costs.

 

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**Additional Costs**– Costswere not deducted for depletion, depreciation and/or amortization (a non-cashitem), or federal income tax.

 

**Data Sources**– Datafurnished by Edge included basic well information, operating cost, ownership,pricing, and production information on certain leases. The remaining productionhistories were taken from IHS Energy data archives.

 

**Context** – We specificallyadvise that any particular reserve estimate for a specific property not be usedout of context with the overall report.  ***The revenues and present worth of future netrevenues are not represented to be market value either for individualproperties or on a total property basis.***

 

We have not inspected the propertiesincluded in this report, nor have we conducted independent well tests. W.D. VonGonten & Co. and our employees have no direct ownership in any of theproperties included in this report. Our fees are based on hourly expense andare not related to the reserve and revenue estimates produced in this report.

 

Thank you for theopportunity to work with Edge on this project.

 
|   | Respectfully  submitted,          |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | /s/ W. D. Von  Gonten, Jr.        |   |
|   | William  D. Von Gonten, Jr., P.E. |
|   | TX# 73244                         |

 

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