Exhibit
99.1








January
28, 2010





Mr. Mark
L. Pease


BreitBurn
Management Company, LLC


600
Travis Street, Suite 4800


Houston,
Texas 77002





Dear Mr.
Pease:





In
accordance with your request, we have estimated the proved reserves and future
revenue, as of December 31, 2009, to the BreitBurn Operating L.P. (BOLP)
interest in certain oil and gas properties located in California, Florida, and
Wyoming.  It is our understanding that the proved reserves estimated
in this report constitute approximately 30 percent of all proved reserves owned
by BOLP.  The estimates in this report have been prepared in
accordance with the definitions and guidelines of the U.S. Securities and
Exchange Commission (SEC) and, with the exception of the exclusion of future
income taxes, conform to the FASB Accounting Standards Codification Topic 932,
Extractive Activities—Oil and Gas.  Definitions are presented
immediately following this letter.  This report has been prepared for
BOLP's use in filing with the SEC.





We
estimate the net reserves and future net revenue to the BOLP interest in these
properties, as of December 31, 2009, to be:





Net
      Reserves
                        
                        
                        Future
      Net Revenue (M$)Oil
                        
                        
                        NGL
                        
                        
                        Gas
                        
                        
                        
                        
                        
                        Present
      WorthCategory
                        
                        (MBBL)
                        
                        
                        (MBBL)
                        
                        
                        (MMCF)
                        
                        
                        Total
                        
                        
                        at
      10%Proved
      Developed Producing
                        
                        
                        28,870.8
                        
                        
                        
                        0.4
                        
                        
                        
                        0,944.0
                        
                        
                        
                        571,725.1
                        
                        
                        
                        339,233.4Proved
      Developed Non-Producing
                        
                        
                        01,577.6
                        
                        
                        
                        0.0
                        
                        
                        
                        0,212.0
                        
                        
                        
                        039,199.3
                        
                        
                        
                        019,598.5Proved
      Undeveloped
                        
                        
                        03,321.1
                        
                        
                        
                        0.0
                        
                        
                        
                        0,000.0
                        
                        
                        
                        064,540.9
                        
                        
                        
                        028,569.0Total Proved
                        
                        
                        33,769.5
                        
                        
                        
                        0.4
                        
                        
                        
                        1,156.0
                        
                        
                        
                        675,465.2
                        
                        
                        
                        387,401.0





Totals
may not add because of rounding.





The oil
reserves shown include crude oil and condensate.  Oil and natural gas
liquids (NGL) volumes are expressed in thousands of barrels (MBBL); a barrel is
equivalent to 42 United States gallons.  Gas volumes are expressed in
millions of cubic feet (MMCF) at standard temperature and pressure
bases.





The
estimates shown in this report are for proved reserves.  As requested,
probable and possible reserves that exist for these properties have not been
included.  This report does not include any value that could be
attributed to interests in undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated.  Reserves categorization
conveys the relative degree of certainty; reserves subcategorization is based on
development and production status.  The estimates of reserves and
future revenue included herein have not been adjusted for risk.





Future
gross revenue to the BOLP interest is prior to deducting state production taxes
and ad valorem taxes.  Future net revenue is after deductions for
these taxes, future capital costs, operating expenses, abandonment costs, and
payments to net profits interests but before consideration of federal income
taxes.  The future net revenue has been discounted at an annual rate
of 10 percent to determine its present worth.  The present worth is
shown to indicate the effect of time on the value of money and should not be
construed as being the fair market value of the properties.
















For the
purposes of this report, we did not perform any field inspection of the
properties, nor did we examine the mechanical operation or condition of the
wells and facilities.  We have not investigated possible environmental
liability related to the properties; therefore, our estimates do not include any
costs due to such possible liability.  Our estimates of future revenue
include BreitBurn Management Company, LLC's (BreitBurn's) estimates of the costs
to abandon the wells and production facilities, net of any salvage
value.  Abandonment costs are included as capital costs.





Prices
used in this report are based on the 12-month unweighted arithmetic average of
the first-day-of-the-month price for the period January through December
2009.  For oil and NGL volumes for the California and Florida
properties, the average Energy Information Administration Cushing, Oklahoma,
West Texas Intermediate spot price of $61.18 per barrel is adjusted by lease for
quality, transportation fees, and regional price differentials.  For
oil and NGL volumes for the Wyoming properties, the average Alberta Bow River
Hardisty posted price of $51.29 per barrel is adjusted by lease for quality,
transportation fees, and regional price differentials.  For gas
volumes, the average Henry Hub spot price of $3.866 per MMBTU is adjusted by
lease for energy content, transportation fees, and regional price
differentials.  All prices are held constant throughout the lives of
the properties.





Lease and
well operating costs used in this report are based on operating expense records
of BreitBurn.  For nonoperated properties, the lease and well
operating costs include the per-well overhead expenses allowed under joint
operating agreementsalong with estimates of costs to be
incurred at and below the district and field levels.  As requested,
lease and well operating costs for the operated properties are limited to direct
lease- and field-level costs and BreitBurn's estimate of the portion of its
headquarters general and administrative overhead expenses necessary to operate
the properties.  Lease and well operating costs are held constant
throughout the lives of the properties.  Capital costs are included as
required for recurring maintenance projects, workovers, new development wells,
and production equipment.  The future capital costs are held constant
to the date of expenditure.





We have
made no investigation of potential gas volume and value imbalances resulting
from overdelivery or underdelivery to the BOLP interest.  Therefore,
our estimates of reserves and future revenue do not include adjustments for the
settlement of any such imbalances; our projections are based on BOLP receiving
its net revenue interest share of estimated future gross gas
production.





The
reserves shown in this report are estimates only and should not be construed as
exact quantities.  Proved reserves are those quantities of oil and gas
which, by analysis of engineering and geoscience data, can be estimated with
reasonable certainty to be economically producible.  If the reserves
are recovered, the revenues therefrom and the costs related thereto could be
more or less than the estimated amounts.  Because of governmental
policies and uncertainties of supply and demand, the sales rates, prices
received for the reserves, and costs incurred in recovering such reserves may
vary from assumptions made while preparing this report.  Estimates of
reserves may increase or decrease as a result of future operations, market
conditions, or changes in regulations.





For the
purposes of this report, we used technical and economic data including, but not
limited to, well logs, geologic maps, well test data, production data,
historical price and cost information, and property ownership
interests.  The reserves in this report have been estimated using
deterministic methods; these estimates have been prepared in accordance with
generally accepted petroleum engineering and evaluation
principles.  We used standard engineering and geoscience methods, or a
combination of methods, such as performance analysis, volumetric analysis, and
analogy, that we considered to be appropriate and necessary to establish
reserves quantities and reserves categorization that conform to SEC definitions
and guidelines.  In evaluating the information at our disposal
concerning this report, we have excluded from our consideration all matters as
to which the controlling interpretation may be legal or accounting, rather than
engineering and geoscience.  As in all aspects of oil and gas
evaluation, there are uncertainties inherent in the interpretation of
engineering and geoscience data; therefore, our conclusions necessarily
represent only informed professional judgment.











The
titles to the properties have not been examined by Netherland, Sewell &
Associates, Inc. (NSAI), nor has the actual degree or type of interest owned
been independently confirmed.  The data used in our estimates were
obtained from BOLP, BreitBurn, and the nonconfidential files of NSAI and were
accepted as accurate.  Supporting geoscience, field performance, and
work data are on file in our office.  The technical persons
responsible for preparing the reserves estimates presented herein meet the
requirements regarding qualifications, independence, objectivity, and
confidentiality set forth in the Standards Pertaining to the Estimating and
Auditing of Oil and Gas Reserves Information promulgated by the Society of
Petroleum Engineers.  We are independent petroleum engineers,
geologists, geophysicists, and petrophysicists; we do not own an interest in
these properties and are not employed on a contingent basis.





Sincerely,NETHERLAND,
      SEWELL & ASSOCIATES, INC.Texas
      Registered Engineering Firm F-002699/s/
      C.H. (Scott) Rees IIIBy:C.H.
      (Scott) Rees III, P.E.Chairman
      and Chief Executive Officer/s/
      J. Carter Henson, Jr.
              
              /s/
      Mike K. NortonBy:
              By:J.
      Carter Henson, Jr., P.E. 73964
              
              Mike
      K. Norton, P.G. 441Senior
      Vice President
              
              Senior
      Vice PresidentDate
      Signed:  January 28, 2010
              Date
      Signed:  January 28,
2010





JCH:LRG




Please be
advised that the digital document you are viewing is provided by Netherland,
Sewell & Associates, Inc. (NSAI) as a convenience to our
clients.  The digital document is intended to be substantively the
same as the original signed document maintained by NSAI.  The digital
document is subject to the parameters, limitations, and conditions stated in the
original document.  In the event of any differences between the
digital document and the original document, the original document shall control
and supersede the digital document.












DEFINITIONS
OF OIL AND GAS RESERVES


Adapted
from U.S. Securities and Exchange Commission Regulation S-X Section
210.4-10(a)





The
following definitions are set forth in U.S. Securities and Exchange Commission
(SEC) Regulation S-X Section 210.4-10(a).  Also included is
supplemental information from (1) the 2007 Petroleum Resources Management System
approved by the Society of Petroleum Engineers, (2) the FASB Accounting
Standards Codification Topic 932, Extractive Activities—Oil and Gas, and (3) the
SEC's Compliance and Disclosure Interpretations.





(1) Acquisition of
properties.Costs incurred to purchase, lease or otherwise
acquire a property, including costs of lease bonuses and options to purchase or
lease properties, the portion of costs applicable to minerals when land
including mineral rights is purchased in fee, brokers' fees, recording fees,
legal costs, and other costs incurred in acquiring properties.





(2) Analogous
reservoir.  Analogous reservoirs, as used in resources
assessments, have similar rock and fluid properties, reservoir conditions
(depth, temperature, and pressure) and drive mechanisms, but are typically at a
more advanced stage of development than the reservoir of interest and thus may
provide concepts to assist in the interpretation of more limited data and
estimation of recovery.  When used to support proved reserves, an
"analogous reservoir" refers to a reservoir that shares the following
characteristics with the reservoir of interest:





(i)
            Same
      geological formation (but not necessarily in pressure communication with
      the reservoir of interest);


(ii)
            Same
      environment of deposition;


(iii)
            Similar
      geological structure; and


(iv)
            Same
      drive mechanism.





Instruction to paragraph
(a)(2): Reservoir properties must, in the aggregate, be no more favorable
in the analog than in the reservoir of interest.





(3) Bitumen.  Bitumen,
sometimes referred to as natural bitumen, is petroleum in a solid or semi-solid
state in natural deposits with a viscosity greater than 10,000 centipoise
measured at original temperature in the deposit and atmospheric pressure, on a
gas free basis.  In its natural state it usually contains sulfur,
metals, and other non-hydrocarbons.





(4) Condensate.  Condensate
is a mixture of hydrocarbons that exists in the gaseous phase at original
reservoir temperature and pressure, but that, when produced, is in the liquid
phase at surface pressure and temperature.





(5) Deterministic
estimate.  The method of estimating reserves or resources is
called deterministic when a single value for each parameter (from the
geoscience, engineering, or economic data) in the reserves calculation is used
in the reserves estimation procedure.





(6) Developed oil and gas
reserves.  Developed oil and gas reserves are reserves of any
category that can be expected to be recovered:





(i)
            Through
      existing wells with existing equipment and operating methods or in which
      the cost of the required equipment is relatively minor compared to the
      cost of a new well; and


(ii)
            Through
      installed extraction equipment and infrastructure operational at the time
      of the reserves estimate if the extraction is by means not involving a
      well.





Supplemental
definitions from the 2007 Petroleum Resources Management System:
  Developed
Producing Reserves – Developed Producing Reserves are expected to be recovered
from completion intervals that are open and producing at the time of the
estimate.  Improved recovery reserves are considered producing only
after the improved recovery project is in operation.
  Developed
Non-Producing Reserves – Developed Non-Producing Reserves include shut-in and
behind-pipe Reserves.  Shut-in Reserves are expected to be recovered
from (1) completion intervals which are open at the time of the estimate but
which have not yet started producing, (2) wells which were shut-in for market
conditions or pipeline connections, or (3) wells not capable of production for
mechanical reasons.  Behind-pipe Reserves are expected to be recovered
from zones in existing wells which will require additional completion work or
future recompletion prior to start of production.  In all cases,
production can be initiated or restored with relatively low expenditure compared
to the cost of drilling a new well.







(7) Development
costs.Costs incurred to obtain access to proved reserves and
to provide facilities for extracting, treating, gathering and storing the oil
and gas.  More specifically, development costs, including depreciation
and applicable operating costs of support equipment and facilities and other
costs of development activities, are costs incurred to:





(i)
            Gain
      access to and prepare well locations for drilling, including surveying
      well locations for the purpose of determining specific development
      drilling sites, clearing ground, draining, road building, and relocating
      public roads, gas lines, and power lines, to the extent necessary in
      developing the proved reserves.


(ii)
            Drill
      and equip development wells, development-type stratigraphic test wells,
      and service wells, including the costs of platforms and of well equipment
      such as casing, tubing, pumping equipment, and the wellhead
      assembly.










DEFINITIONS
OF OIL AND GAS RESERVES


Adapted
from U.S. Securities and Exchange Commission Regulation S-X Section
210.4-10(a)





(iii)
            Acquire,
      construct, and install production facilities such as lease flow lines,
      separators, treaters, heaters, manifolds, measuring devices, and
      production storage tanks, natural gas cycling and processing plants, and
      central utility and waste disposal
systems.


(iv)
            Provide
      improved recovery systems.





(8) Development
project.  A development project is the means by which petroleum
resources are brought to the status of economically producible.  As
examples, the development of a single reservoir or field, an incremental
development in a producing field, or the integrated development of a group of
several fields and associated facilities with a common ownership may constitute
a development project.





(9) Development
well.  A well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be
productive.





(10)
Economically
producible.  The term economically producible, as it relates to
a resource, means a resource which generates revenue that exceeds, or is
reasonably expected to exceed, the costs of the operation.  The value
of the products that generate revenue shall be determined at the terminal point
of oil and gas producing activities as defined in paragraph (a)(16) of this
section.





(11)
Estimated ultimate recovery
(EUR).  Estimated ultimate recovery is the sum of reserves
remaining as of a given date and cumulative production as of that
date.





(12)Exploration
costs.  Costs incurred in identifying areas that may warrant
examination and in examining specific areas that are considered to have
prospects of containing oil and gas reserves, including costs of drilling
exploratory wells and exploratory-type stratigraphic test
wells.  Exploration costs may be incurred both before acquiring the
related property (sometimes referred to in part as prospecting costs) and after
acquiring the property.  Principal types of exploration costs, which
include depreciation and applicable operating costs of support equipment and
facilities and other costs of exploration activities, are:





(i)
            Costs
      of topographical, geographical and geophysical studies, rights of access
      to properties to conduct those studies, and salaries and other expenses of
      geologists, geophysical crews, and others conducting those
      studies.  Collectively, these are sometimes referred to as
      geological and geophysical or "G&G"
costs.


(ii)
            Costs
      of carrying and retaining undeveloped properties, such as delay rentals,
      ad valorem taxes on properties, legal costs for title defense, and the
      maintenance of land and lease
records.


(iii)
            Dry
      hole contributions and bottom hole
  contributions.


(iv)
            Costs
      of drilling and equipping exploratory
wells.


(v)
            Costs
      of drilling exploratory-type stratigraphic test
  wells.





(13)
Exploratory
well.  An exploratory well is a well drilled to find a new
field or to find a new reservoir in a field previously found to be productive of
oil or gas in another reservoir.  Generally, an exploratory well is
any well that is not a development well, an extension well, a service well, or a
stratigraphic test well as those items are defined in this section.





(14)
Extension
well.  An extension well is a well drilled to extend the limits
of a known reservoir.





(15)
Field.  An
area consisting of a single reservoir or multiple reservoirs all grouped on or
related to the same individual geological structural feature and/or
stratigraphic condition.  There may be two or more reservoirs in a
field which are separated vertically by intervening impervious strata, or
laterally by local geologic barriers, or by both.  Reservoirs that are
associated by being in overlapping or adjacent fields may be treated as a single
or common operational field.  The geological terms "structural
feature" and "stratigraphic condition" are intended to identify localized
geological features as opposed to the broader terms of basins, trends,
provinces, plays, areas-of-interest, etc.





(16)
Oil and gas producing
activities.





(i)
            Oil
      and gas producing activities
include:





(A)
            The
      search for crude oil, including condensate and natural gas liquids, or
      natural gas ("oil and gas") in their natural states and original
      locations;


(B)
            The
      acquisition of property rights or properties for the purpose of further
      exploration or for the purpose of removing the oil or gas from such
      properties;


(C)
            The
      construction, drilling, and production activities necessary to retrieve
      oil and gas from their natural reservoirs, including the acquisition,
      construction, installation, and maintenance of field gathering and storage
      systems, such as:


(1)
            Lifting
      the oil and gas to the surface; and


(2)
            Gathering,
      treating, and field processing (as in the case of processing gas to
      extract liquid hydrocarbons); and


(D)
            Extraction
      of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil
      sands, shale, coalbeds, or other nonrenewable natural resources which are
      intended to be upgraded into synthetic oil or gas, and activities
      undertaken with a view to such
extraction.










DEFINITIONS
OF OIL AND GAS RESERVES


Adapted
from U.S. Securities and Exchange Commission Regulation S-X Section
210.4-10(a)





Instruction 1 to paragraph
(a)(16)(i): The oil and gas production function shall be regarded as
ending at a "terminal point", which is the outlet valve on the lease or field
storage tank.  If unusual physical or operational circumstances exist,
it may be appropriate to regard the terminal point for the production function
as:





a.
            The
      first point at which oil, gas, or gas liquids, natural or synthetic, are
      delivered to a main pipeline, a common carrier, a refinery, or a marine
      terminal; and


b.
            In
      the case of natural resources that are intended to be upgraded into
      synthetic oil or gas, if those natural resources are delivered to a
      purchaser prior to upgrading, the first point at which the natural
      resources are delivered to a main pipeline, a common carrier, a refinery,
      a marine terminal, or a facility which upgrades such natural resources
      into synthetic oil or gas.





Instruction 2 to paragraph
(a)(16)(i): For purposes of this paragraph (a)(16), the term saleable hydrocarbons means
hydrocarbons that are saleable in the state in which the hydrocarbons are
delivered.





(ii)
            Oil
      and gas producing activities do not
include:





(A)
            Transporting,
      refining, or marketing oil and gas;


(B)
            Processing
      of produced oil, gas, or natural resources that can be upgraded into
      synthetic oil or gas by a registrant that does not have the legal right to
      produce or a revenue interest in such
  production;


(C)
            Activities
      relating to the production of natural resources other than oil, gas, or
      natural resources from which synthetic oil and gas can be extracted;
      or


(D)
            Production
      of geothermal steam.





(17)
Possible
reserves.Possible reserves are those additional reserves that
are less certain to be recovered than probable reserves.





(i)
            When
      deterministic methods are used, the total quantities ultimately recovered
      from a project have a low probability of exceeding proved plus probable
      plus possible reserves.  When probabilistic methods are used,
      there should be at least a 10% probability that the total quantities
      ultimately recovered will equal or exceed the proved plus probable plus
      possible reserves estimates.


(ii)
            Possible
      reserves may be assigned to areas of a reservoir adjacent to probable
      reserves where data control and interpretations of available data are
      progressively less certain.  Frequently, this will be in areas
      where geoscience and engineering data are unable to define clearly the
      area and vertical limits of commercial production from the reservoir by a
      defined project.


(iii)
            Possible
      reserves also include incremental quantities associated with a greater
      percentage recovery of the hydrocarbons in place than the recovery
      quantities assumed for probable
reserves.


(iv)
            The
      proved plus probable and proved plus probable plus possible reserves
      estimates must be based on reasonable alternative technical and commercial
      interpretations within the reservoir or subject project that are clearly
      documented, including comparisons to results in successful similar
      projects.


(v)
            Possible
      reserves may be assigned where geoscience and engineering data identify
      directly adjacent portions of a reservoir within the same accumulation
      that may be separated from proved areas by faults with displacement less
      than formation thickness or other geological discontinuities and that have
      not been penetrated by a wellbore, and the registrant believes that such
      adjacent portions are in communication with the known (proved)
      reservoir.  Possible reserves may be assigned to areas that are
      structurally higher or lower than the proved area if these areas are in
      communication with the proved
reservoir.


(vi)
            Pursuant
      to paragraph (a)(22)(iii) of this section, where direct observation has
      defined a highest known oil (HKO) elevation and the potential exists for
      an associated gas cap, proved oil reserves should be assigned in the
      structurally higher portions of the reservoir above the HKO only if the
      higher contact can be established with reasonable certainty through
      reliable technology.  Portions of the reservoir that do not meet
      this reasonable certainty criterion may be assigned as probable and
      possible oil or gas based on reservoir fluid properties and pressure
      gradient interpretations.





(18)Probable reserves.Probable
reserves are those additional reserves that are less certain to be recovered
than proved reserves but which, together with proved reserves, are as likely as
not to be recovered.





(i)
            When
      deterministic methods are used, it is as likely as not that actual
      remaining quantities recovered will exceed the sum of estimated proved
      plus probable reserves.  When probabilistic methods are used,
      there should be at least a 50% probability that the actual quantities
      recovered will equal or exceed the proved plus probable reserves
      estimates.


(ii)
            Probable
      reserves may be assigned to areas of a reservoir adjacent to proved
      reserves where data control or interpretations of available data are less
      certain, even if the interpreted reservoir continuity of structure or
      productivity does not meet the reasonable certainty
      criterion.  Probable reserves may be assigned to areas that are
      structurally higher than the proved area if these areas are in
      communication with the proved
reservoir.


(iii)
            Probable
      reserves estimates also include potential incremental quantities
      associated with a greater percentage recovery of the hydrocarbons in place
      than assumed for proved reserves.


(iv)
            See
      also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this
      section.












DEFINITIONS
OF OIL AND GAS RESERVES


Adapted
from U.S. Securities and Exchange Commission Regulation S-X Section
210.4-10(a)





(19)
Probabilistic estimate.The method of estimation of reserves or resources is called probabilistic
when the full range of values that could reasonably occur for each unknown
parameter (from the geoscience and engineering data) is used to generate a full
range of possible outcomes and their associated probabilities of
occurrence.





(20)
Production
costs.





(i)
            Costs
      incurred to operate and maintain wells and related equipment and
      facilities, including depreciation and applicable operating costs of
      support equipment and facilities and other costs of operating and
      maintaining those wells and related equipment and
      facilities.  They become part of the cost of oil and gas
      produced.  Examples of production costs (sometimes called
      lifting costs) are:





(A)
            Costs
      of labor to operate the wells and related equipment and
      facilities.


(B)
            Repairs
      and maintenance.


(C)
            Materials,
      supplies, and fuel consumed and supplies utilized in operating the wells
      and related equipment and
facilities.


(D)
            Property
      taxes and insurance applicable to proved properties and wells and related
      equipment and facilities.


(E)
            Severance
      taxes.





(ii)
            Some
      support equipment or facilities may serve two or more oil and gas
      producing activities and may also serve transportation, refining, and
      marketing activities.  To the extent that the support equipment
      and facilities are used in oil and gas producing activities, their
      depreciation and applicable operating costs become exploration,
      development or production costs, as appropriate.  Depreciation,
      depletion, and amortization of capitalized acquisition, exploration, and
      development costs are not production costs but also become part of the
      cost of oil and gas produced along with production (lifting) costs
      identified above.





(21)
Proved area.The part
of a property to which proved reserves have been specifically
attributed.





(22)
Proved oil and gas reserves.Proved oil and gas reserves are those quantities of oil and gas, which,
by analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible—from a given date forward, from known
reservoirs, and under existing economic conditions, operating methods, and
government regulations—prior to the time at which contracts providing the right
to operate expire, unless evidence indicates that renewal is reasonably certain,
regardless of whether deterministic or probabilistic methods are used for the
estimation.  The project to extract the hydrocarbons must have
commenced or the operator must be reasonably certain that it will commence the
project within a reasonable time.





(i)
            The
      area of the reservoir considered as proved
  includes:





(A)
            The
      area identified by drilling and limited by fluid contacts, if any,
      and


(B)
            Adjacent
      undrilled portions of the reservoir that can, with reasonable certainty,
      be judged to be continuous with it and to contain economically producible
      oil or gas on the basis of available geoscience and engineering
      data.





(ii)
            In
      the absence of data on fluid contacts, proved quantities in a reservoir
      are limited by the lowest known hydrocarbons (LKH) as seen in a well
      penetration unless geoscience, engineering, or performance data and
      reliable technology establishes a lower contact with reasonable
      certainty.


(iii)
            Where
      direct observation from well penetrations has defined a highest known oil
      (HKO) elevation and the potential exists for an associated gas cap, proved
      oil reserves may be assigned in the structurally higher portions of the
      reservoir only if geoscience, engineering, or performance data and
      reliable technology establish the higher contact with reasonable
      certainty.


(iv)
            Reserves
      which can be produced economically through application of improved
      recovery techniques (including, but not limited to, fluid injection) are
      included in the proved classification
when:





(A)
            Successful
      testing by a pilot project in an area of the reservoir with properties no
      more favorable than in the reservoir as a whole, the operation of an
      installed program in the reservoir or an analogous reservoir, or other
      evidence using reliable technology establishes the reasonable certainty of
      the engineering analysis on which the project or program was based;
      and


(B)
            The
      project has been approved for development by all necessary parties and
      entities, including governmental
entities.





(v)
            Existing
      economic conditions include prices and costs at which economic
      producibility from a reservoir is to be determined.  The price
      shall be the average price during the 12-month period prior to the ending
      date of the period covered by the report, determined as an unweighted
      arithmetic average of the first-day-of-the-month price for each month
      within such period, unless prices are defined by contractual arrangements,
      excluding escalations based upon future
  conditions.





(23)
Proved
properties.  Properties with proved reserves.










DEFINITIONS
OF OIL AND GAS RESERVES


Adapted
from U.S. Securities and Exchange Commission Regulation S-X Section
210.4-10(a)





(24)
Reasonable
certainty.  If deterministic methods are used, reasonable
certainty means a high degree of confidence that the quantities will be
recovered.  If probabilistic methods are used, there should be at
least a 90% probability that the quantities actually recovered will equal or
exceed the estimate.  A high degree of confidence exists if the
quantity is much more likely to be achieved than not, and, as changes due to
increased availability of geoscience (geological, geophysical, and geochemical),
engineering, and economic data are made to estimated ultimate recovery (EUR)
with time, reasonably certain EUR is much more likely to increase or remain
constant than to decrease.





(25)
Reliable technology.Reliable technology is a grouping of one or more technologies (including
computational methods) that has been field tested and has been demonstrated to
provide reasonably certain results with consistency and repeatability in the
formation being evaluated or in an analogous formation.





(26)
Reserves.Reserves
are estimated remaining quantities of oil and gas and related substances
anticipated to be economically producible, as of a given date, by application of
development projects to known accumulations.  In addition, there must
exist, or there must be a reasonable expectation that there will exist, the
legal right to produce or a revenue interest in the production, installed means
of delivering oil and gas or related substances to market, and all permits and
financing required to implement the project.





Note to paragraph (a)(26):
Reserves should not be assigned to adjacent reservoirs isolated by major,
potentially sealing, faults until those reservoirs are penetrated and evaluated
as economically producible.  Reserves should not be assigned to areas
that are clearly separated from a known accumulation by a non-productive
reservoir (i.e., absence of reservoir, structurally low reservoir, or negative
test results). Such areas may contain prospective resources (i.e., potentially
recoverable resources from undiscovered accumulations).


Excerpted
from the FASB Accounting Standards Codification Topic 932, Extractive
Activities—Oil and Gas:
  932-235-50-30  A
standardized measure of discounted future net cash flows relating to an entity's
interests in both of the following shall be disclosed as of the end of the
year:
 
 a.
                  Proved
      oil and gas reserves (see paragraphs 932-235-50-3 through
      50-11B)
 b.
                  Oil
      and gas subject to purchase under long-term supply, purchase, or similar
      agreements and contracts in which the entity participates in the operation
      of the properties on which the oil or gas is located or otherwise serves
      as the producer of those reserves (see paragraph
      932-235-50-7).
 The
standardized measure of discounted future net cash flows relating to those two
types of interests in reserves may be combined for reporting
purposes.
  932-235-50-31  All
of the following information shall be disclosed in the aggregate and for each
geographic area for which reserve quantities are disclosed in accordance with
paragraphs 932-235-50-3 through 50-11B:
 
 a.
                  Future
      cash inflows.  These shall be computed by applying prices used
      in estimating the entity's proved oil and gas reserves to the year-end
      quantities of those reserves.  Future price changes shall be
      considered only to the extent provided by contractual arrangements in
      existence at year-end.
 b.
                  Future
      development and production costs.  These costs shall be computed
      by estimating the expenditures to be incurred in developing and producing
      the proved oil and gas reserves at the end of the year, based on year-end
      costs and assuming continuation of existing economic
      conditions.  If estimated development expenditures are
      significant, they shall be presented separately from estimated production
      costs.
 c.
                  Future
      income tax expenses.  These expenses shall be computed by
      applying the appropriate year-end statutory tax rates, with consideration
      of future tax rates already legislated, to the future pretax net cash
      flows relating to the entity's proved oil and gas reserves, less the tax
      basis of the properties involved.  The future income tax
      expenses shall give effect to tax deductions and tax credits and
      allowances relating to the entity's proved oil and gas
      reserves.
 d.
                  Future
      net cash flows.  These amounts are the result of subtracting
      future development and production costs and future income tax expenses
      from future cash inflows.
 e.
                  Discount.  This
      amount shall be derived from using a discount rate of 10 percent a year to
      reflect the timing of the future net cash flows relating to proved oil and
      gas reserves.
 f.
                  Standardized
      measure of discounted future net cash flows.  This amount is the
      future net cash flows less the computed
  discount.
 (27)
Reservoir.  A
porous and permeable underground formation containing a natural accumulation of
producible oil and/or gas that is confined by impermeable rock or water barriers
and is individual and separate from other reservoirs.





(28)
Resources.  Resources
are quantities of oil and gas estimated to exist in naturally occurring
accumulations.  A portion of the resources may be estimated to be
recoverable, and another portion may be considered to be
unrecoverable.  Resources include both discovered and undiscovered
accumulations.










DEFINITIONS
OF OIL AND GAS RESERVES


Adapted
from U.S. Securities and Exchange Commission Regulation S-X Section
210.4-10(a)





(29)
Service
well.  A well drilled or completed for the purpose of
supporting production in an existing field.  Specific purposes of
service wells include gas injection, water injection, steam injection, air
injection, salt-water disposal, water supply for injection, observation, or
injection for in-situ combustion.





(30)
Stratigraphic test
well.  A stratigraphic test well is a drilling effort,
geologically directed, to obtain information pertaining to a specific geologic
condition.  Such wells customarily are drilled without the intent of
being completed for hydrocarbon production.  The classification also
includes tests identified as core tests and all types of expendable holes
related to hydrocarbon exploration.  Stratigraphic tests are
classified as "exploratory type" if not drilled in a known area or "development
type" if drilled in a known area.





(31)
Undeveloped oil and gas
reserves.  Undeveloped oil and gas reserves are reserves of any
category that are expected to be recovered from new wells on undrilled acreage,
or from existing wells where a relatively major expenditure is required for
recompletion.





(i)
            Reserves
      on undrilled acreage shall be limited to those directly offsetting
      development spacing areas that are reasonably certain of production when
      drilled, unless evidence using reliable technology exists that establishes
      reasonable certainty of economic producibility at greater
      distances.


(ii)
            Undrilled
      locations can be classified as having undeveloped reserves only if a
      development plan has been adopted indicating that they are scheduled to be
      drilled within five years, unless the specific circumstances, justify a
      longer time.


From
the SEC's Compliance and Disclosure Interpretations (October 26,
2009):
  Although
several types of projects — such as constructing offshore platforms and
development in urban areas, remote locations or environmentally sensitive
locations — by their nature customarily take a longer time to develop and
therefore often do justify longer time periods, this determination must always
take into consideration all of the facts and circumstances. No particular type
of project per se justifies a longer time period, and any extension beyond five
years should be the exception, and not the rule.
  Factors
that a company should consider in determining whether or not circumstances
justify recognizing reserves even though development may extend past five years
include, but are not limited to, the following:





Ÿ
              The company's level of ongoing
      significant development activities in the area to be developed (for
      example, drilling only the minimum number of wells necessary to maintain
      the lease generally would not constitute significant development
      activities);
 Ÿ
              The company's historical
      record at completing development of comparable long-term
      projects;
 Ÿ
              The amount of time in which
      the company has maintained the leases, or booked the reserves, without
      significant development
activities;
 Ÿ
              The extent to which the
      company has followed a previously adopted development plan (for example,
      if a company has changed its development plan several times without taking
      significant steps to implement any of those plans, recognizing proved
      undeveloped reserves typically would not be appropriate);
      and
 Ÿ
              The extent to which delays in
      development are caused by external factors related to the physical
      operating environment (for example, restrictions on development on Federal
      lands, but not obtaining government permits), rather than by internal
      factors (for example, shifting resources to develop properties with higher
      priority).





(iii)
            Under
      no circumstances shall estimates for undeveloped reserves be attributable
      to any acreage for which an application of fluid injection or other
      improved recovery technique is contemplated, unless such techniques have
      been proved effective by actual projects in the same reservoir or an
      analogous reservoir, as defined in paragraph (a)(2) of this section, or by
      other evidence using reliable technology establishing reasonable
      certainty.





(32)
Unproved
properties.  Properties with no proved
reserves.