Document:

eh1200142_ex1035.htm

EXHIBIT 10.35

REPORT OF INDEPENDENT PETROLEUM ENGINEERS

RESERVE AND ECONOMIC EVALUATION

OIL AND GAS PROPERTY

TARAPUR AREA

INDIA

Owned by

GEOGLOBAL RESOURCES INC.

January 1, 2011

(December 31, 2010)

 

 

  

  

  

December 29, 2011

GeoGlobal Resources Inc.

200, 625 - 4th Avenue SW

Calgary, AB

T2P 0K2

Attention:  Mr. Sunil Karkera

Dear Sir:

	
Re: 

	
GeoGlobal Resources Inc.

Reserve and Economic Evaluation – January 1, 2011

 

In accordance with your authorization we have performed a reserve and economic evaluation of oil and gas properties in the Tarapur field in India, owned by GeoGlobal Resources Inc. (the "Company") for an effective date of January 1, 2011 (as of December 31, 2010). This report includes all of the reserves owned by the Company.

This evaluation has been carried out in accordance with the guidelines of Regulation S-X, Rule 4 -10 (a) of the Securities Exchange Act, with respect to the classification of Proved and Probable Reserves, in conjunction with the standards set out in the Canadian Oil and Gas Evaluation Handbook, Volume 1 – Second Edition (COGEH-1) prepared jointly by the Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy and Petroleum (Petroleum Society). The methodology and procedures used for the preparation of this report are appropriate for the purpose of this report.  The report has been prepared and/or supervised by a "Qualified Reserves Evaluator" as demonstrated on the accompanying Certificate of Qualification of the author(s).

The SCOPE OF REPORT contains the authorization and purpose of the report and describes the methodology and economic parameters used in the preparation of this report. We have used all methods and procedures as considered necessary under the circumstances to prepare the report.

The SUMMARY OF RESERVES AND ECONOMICS (SEC) contains the results of the economic forecasts using the new pricing guidelines as defined in Regulation S-X 210.4-10 22 (v), and expressed in United States dollars for the proved and proved plus probable reserves, as applicable for SEC filing.

The DISCUSSION contains a description of the interests and burdens, reserves and geology, production forecasts, product prices, capital and operating costs and a map of each major property.  The economic results and cash flow forecasts (before income tax) are also presented on an entity and property summary level.

 

 

  

  

  

 

A REPRESENTATION LETTER from the Company, confirming that to the best of their knowledge all the information they provided for our use in the preparation of this report was complete and accurate as of the effective date, is enclosed following the Glossary.

Because the reserves data are based on judgments regarding future events, actual results will vary and the variations may be material. We are not aware of any regulatory issues relating to the proved reserves in this report that would cause them to not be recovered. Certain of the probable reserves assigned are waiting on regulatory approvals prior to being placed on production, upon which they would be reclassified as proven reserves. The operator is in the process of seeking the requested approvals.   We have no responsibility to update our report for events and circumstances which may have occurred since the preparation date of this report.

Prior to public disclosure of any information contained in this report, or our name as author, our written consent must be obtained, as to the information being disclosed and the manner in which it is presented.  This report may not be reproduced, distributed or made available for use by any other party without our written consent and may not be reproduced for distribution at any time without the complete context of the report, unless otherwise reviewed and approved by us.

We consent to the submission of this report, in its entirety, to securities regulatory agencies and stock exchanges, by the Company.

It has been a pleasure to prepare this report and the opportunity to have been of service is appreciated.

Yours very truly,

Chapman Petroleum Engineering Ltd.

[Original Signed By:]

C.W. Chapman

C.W. Chapman, P. Eng.,

President

[Original Signed By:]

Roy A. Collver

Roy A. Collver, P. Eng

Petroleum Engineer

 

 

  

  

  

 

CERTIFICATE OF QUALIFICATION

 

	
 

	
I, C. W. CHAPMAN, P. Eng., Professional Engineer of the City of Calgary, Alberta, Canada, officing at Suite 445, 708 – 11th Avenue S.W., hereby certify:

	
1.

	
THAT I am a registered Professional Engineer in the Province of Alberta and a member of the Australasian Institute of Mining and Metallurgy.

	
2.

	
THAT I graduated from the University of Alberta with a Bachelor of Science degree in Mechanical Engineering in 1971.

	
3.

	
THAT I have been employed in the petroleum industry since graduation by various companies and have been directly involved in reservoir engineering, petrophysics, operations, and evaluations during that time.

	
4.

	
THAT I have in excess of 25 years in the conduct of evaluation and engineering studies relating to oil & gas fields in Canada and around the world.

	
5.

	
THAT I participated directly in the evaluation of these assets and properties and preparation of this report for GeoGlobal Resources Inc., dated December 29, 2011 and the parameters and conditions employed in this evaluation were examined by me and adopted as representative and appropriate in establishing the value of these oil and gas properties according to the information available to date.

	
6.

	
THAT I have not, nor do I expect to receive, any direct or indirect interest in the properties or securities of GeoGlobal Resources Inc. its participants or any affiliate thereof.

	
7.

	
THAT I have not examined all of the documents pertaining to the ownership and agreements referred to in this report, or the chain of Title for the oil and gas properties discussed.

	
8.

	
A personal field examination of these properties was considered to be unnecessary because the data available from the Company's records and public sources was satisfactory for our purposes.

[Original Signed By:]

C.W. Chapman

C. W. Chapman, P.Eng.

President

  

  

  

 

 

CERTIFICATE OF QUALIFICATION

 

	
  

	
I, ROY A. COLLVER, of the City of Calgary, Alberta, Canada, officing at Suite 445, 708 – 11th Avenue S.W., hereby certify:

	
1.

	
THAT I am a registered Engineer-In-Training in the Province of Alberta.

	
2.

	
THAT I graduated from Queen’s University in Kingston, Ontario with a Bachelor of Science degree in Engineering Physics in 2005.

	
3.

	
THAT I participated directly in the evaluation of these assets and properties and preparation of this report for GeoGlobal Resources Inc., dated December 29, 2011 and the parameters and conditions employed in this evaluation were examined by me and adopted as representative and appropriate in establishing the value of these oil and gas properties according to the information available to date.

	
4.

	
THAT I have not, nor do I expect to receive, any direct or indirect interest in the properties or securities of GeoGlobal Resources Inc., its participants or any affiliate thereof.

	
5.

	
THAT I have not examined all of the documents pertaining to the ownership and agreements referred to in this report, or the chain of Title for the oil and gas properties discussed.

	
6.

	
A personal field examination of these properties was considered to be unnecessary because the data available from the Company’s records and public sources was satisfactory for our purposes.

[Original Signed By:]

Roy A. Collver

Roy A. Collver, P. Eng.

Petroleum Engineer

  

  

  

TABLE OF CONTENTS

Scope of Report

Authorization

Purpose

Reserve Definitions

Barrels of Oil Equivalent

Sources of Information

Product Sales Arrangements

Royalties

Capital Expenditures and Operating Costs

Income Tax Parameters

Economics

Constant Price Parameters

Summary of Company Reserves and Economics

	 	
Table 1:    

	
Summary of Company Reserves and Economics Before Tax

	 	
Table 1T:  

	
Summary of Company Reserves and Economics After Tax

Discussion

Ownership

Reserves

Production

Product Prices

Capital Expenditures

Operating Costs

 

  

  

  

 

SCOPE OF REPORT

 

Authorization

This evaluation has been authorized by Mr. Sunil Karkera, on behalf of GeoGlobal Resources Inc.   The engineering analysis has been performed during the months of January and February 2011.

Purpose

The purpose of this report was to prepare a third party independent appraisal of all the oil and gas reserves owned by GeoGlobal Resources Inc. for the Company's financial planning and for filing with the SEC in the USA for an effective date of December 31, 2010.

The values in this report do not include the value of the Company's undeveloped land holdings nor the tangible value of their interest in associated plant and well site facilities they may own.

Reserve Definitions

Proved and probable reserves as classified in the report have been based on Rule 4-10(a) of Regulation S-X of the Securities Exchange Act. The following definitions are considered to be consistent with the principles of COGEH and are compliant with the standards of NI 51-101:

Classification of Reserves

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.

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.

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)

	
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.

	
(v)

	
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.

Barrel of Oil Equivalent

If at any time in this report reference is made to “Barrels of Oil Equivalent” (BOE), the conversion used is 6 Mscf : 1 STB (6 Mcf : 1 bbl).

 

 

  

  

  

 

BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf : 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the well head.

 

 

  

  

  

 

Sources of Information

Source of the data used in the preparation of this report are as follows:

 

	 	
i)

	
Ownership and Burdens have been derived from the Company's land records and other information from the Company as required for clarification;

	 	
ii)

	
Production data is acquired from public data sources, except for very recent data or certain wells which are provided directly by the Company;

	 	
iii)

	
Well data is accessed from the Company's well files and from public data sources;

	 	
iv)

	
Operating Costs are based on actual revenue and expense statements provided by the Company for established properties or from discussions with the Company and our experience in the area for new or non-producing properties;

	 	
v)

	
Price differentials are derived from revenue statements, compared to actual posted prices for the appropriate benchmark price over a period of several months for established properties or from discussions with the Company and our experience in the area for new or non-producing properties;

	 	
vi)

	
Timing of Development Plans and Capital estimates are normally determined by discussions with the Company together with our experience and judgment.

 

Product Sales Arrangements

The Company does not have any "hedge" contracts in place at this time.

Royalties

A full provision for Crown royalties under the latest regulations and incentive programs for the Tarapur area have been included in this report.

Under the terms of the Production Sharing Agreement, all royalties and cess fees are paid by the licensee, OGNC.

Capital Expenditures and Operating Costs

Operating costs and capital expenditures have been based on historical experience and analogy where necessary and have not been escalated.

Income Tax Parameters

Net cash flows after consideration of corporate income tax have been included in this report.

The Company has a seven year income tax holiday on production from this area. Once the holiday period has expired, the Company can offset future income with their share of sunk exploration and development capital. Once all sunk capital is recovered, the net revenue from profit petroleum is taxable at a rate of 41.2%. The majority of operating costs are deductible.

Abandonment and restoration costs, net of salvage, have been accounted for in the cash flow forecasts for each level of reserves. Abandonment and restoration cost estimates have been based on discussions with the Company and analogy with similar fields in the area.

Economics

The economic analysis has been performed on a spread sheet format to account for all the terms of the PSC.

Constant Price Parameters

The price used for each area in this report, in accordance with SEC regulation S-X rule 4-10, was 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.

 

Adjustments for crude quality, gas heating value and NGL trucking and fractionation have still been applied to the average prices to reflect actual prices being received.  In addition, no escalation has been applied to either the capital expenditures or operating costs.

The average price shown in the cash flows may differ from year to year due to variations in the proportionate production volumes from each property relative to the total.

 

 

  

  

  

 

For the purpose of US Security Exchange Commission filing, the results of the Constant Prices and Cost case for proved and probable reserves are expressed in United States dollars are presented in the Summary of Reserves and Economics (SEC).

 

 

  

  

  

 

Constant Prices & Costs

 

Table 1

Summary of Company Reserves and Economics

Before Income Tax

January 1, 2011

 

Geoglobal Resources Inc

 

	  	 	

Net To Appraised Interest

	 
	  	 	

Reserves

	 	 	

Cumulative Cash Flow – M$

	 
	  	 	

Light and Medium

Oil MSTB

	 	 	

Sales Gas

MMscf

	 	 	

NGL

Mbbls

	 	 	

Discounted at:

	 
	

 

Description

	 	

Gross

	 	 	

Net

	 	 	

Gross

	 	 	

Net

	 	 	

Gross

	 	 	

Net

	 	 	

Undisc.

	 	 	

5%/year

	 	 	

10%/year

	 	 	

15%/year

	 	 	

20%/year

	 
	

 

Proved Developed Producing

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   Tarapur wells (Kalol)

	 	 	55	 	 	 	55	 	 	 	155	 	 	 	155	 	 	 	0	 	 	 	0	 	 	 	3,611	 	 	 	3,185	 	 	 	2,856	 	 	 	2,596	 	 	 	2,386	 
	
Total Proved Developed Producing

	 	 	55	 	 	 	55	 	 	 	155	 	 	 	155	 	 	 	0	 	 	 	0	 	 	 	3,611	 	 	 	3,185	 	 	 	2,856	 	 	 	2,596	 	 	 	2,386	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

 

Probable

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   Tarapur wells (Kalol)

	 	 	418	 	 	 	409	 	 	 	617	 	 	 	595	 	 	 	0	 	 	 	0	 	 	 	18,127	 	 	 	13,673	 	 	 	10,614	 	 	 	8,439	 	 	 	6,845	 
	
Total Probable

	 	 	418	 	 	 	409	 	 	 	617	 	 	 	595	 	 	 	0	 	 	 	0	 	 	 	18,127	 	 	 	13,673	 	 	 	10,614	 	 	 	8,439	 	 	 	6,845	 
	
Total Proved Plus Probable

	 	 	473	 	 	 	464	 	 	 	772	 	 	 	750	 	 	 	0	 	 	 	0	 	 	 	21,738	 	 	 	16,858	 	 	 	13,470	 	 	 	11,035	 	 	 	9,231	 

 

M$ means thousands of dollars

 

“Gross reserves” means the total of GGR’s working interest in the estimated field reserves before the deduction of the Government’s share of production under the applicable production sharing agreement and before the deduction of all applicable royalties.

 

“Net reserves” means the total of GGR’s working interest in the estimated resources after the deduction of the Government’s share of production under the applicable production sharing agreement and after the deduction of all applicable royalties.

 

Columns may not add precisely due to accumulative rounding of values throughout the report.

 

 

 

  

  

  

 

Constant Prices & Costs

 

Table 1T

Summary of Company Reserves and Economics

After  Income Tax

January 1, 2011

 

Geoglobal Resources Inc

 

	  	 	

Net To Appraised Interest

	 
	  	 	

Reserves

	 	 	

Cumulative Cash Flow – M$

	 
	  	 	

Light and Medium

Oil MSTB

	 	 	

Sales Gas

MMscf

	 	 	

NGL

Mbbls

	 	 	

Discounted at:

	 
	

 

Description

	 	

Gross

	 	 	

Net

	 	 	

Gross

	 	 	

Net

	 	 	

Gross

	 	 	

Net

	 	 	

Undisc.

	 	 	

5%/year

	 	 	

10%/year

	 	 	

15%/year

	 	 	

20%/year

	 
	

 

Proved Developed Producing

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Total Proved Developed Producing (BIT)

	 	 	55	 	 	 	55	 	 	 	155	 	 	 	155	 	 	 	0	 	 	 	0	 	 	 	3,611	 	 	 	3,185	 	 	 	2,856	 	 	 	2,596	 	 	 	2,386	 
	
Company Income Tax

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Total Proved Developed Producing (AIT)

	 	 	55	 	 	 	55	 	 	 	155	 	 	 	155	 	 	 	0	 	 	 	0	 	 	 	3,611	 	 	 	3,185	 	 	 	2,856	 	 	 	2,596	 	 	 	2,386	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

 

Probable

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   Total Probable (BIT)

	 	 	418	 	 	 	409	 	 	 	617	 	 	 	595	 	 	 	0	 	 	 	0	 	 	 	18,127	 	 	 	13,673	 	 	 	10,614	 	 	 	8,439	 	 	 	6,845	 
	
   Company Income Tax

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(2,406	)	 	 	(1,475	)	 	 	(937	)	 	 	(613	)	 	 	(413	)
	
Total Probable (AIT)

	 	 	418	 	 	 	409	 	 	 	617	 	 	 	595	 	 	 	0	 	 	 	0	 	 	 	15,721	 	 	 	12,198	 	 	 	9,677	 	 	 	7,826	 	 	 	6,432	 
	
Total Proved Plus Probable (AIT)

	 	 	473	 	 	 	464	 	 	 	772	 	 	 	750	 	 	 	0	 	 	 	0	 	 	 	19,332	 	 	 	15,383	 	 	 	12,533	 	 	 	10,422	 	 	 	8,818	 

 

MS means thousands of dollars

 

“Gross reserves” means the total of GGR’s working interest in the estimated field reserves before the deduction of the Government’s share of production under the applicable production sharing agreement and before the deduction of all applicable royalties.

 

“Net reserves” means the total of GGR’s working interest in the estimated resources after the deduction of the Government’s share of production under the applicable production sharing agreement and after the deduction of all applicable royalties.

 

Columns may not add precisely due to accumulative rounding of values throughout the report.

 

 

  

  

  

TARAPUR, INDIA

DISCUSSION

Ownership

The company GeoGlobal Resources (Barbados) Inc. owns a 14% participating interest in the TA-1 Development Area (2.14 km2) and a 20% participating interest in the remaining mining lease area (9.7 km2). The TA-1 Development area is currently under commercial development, and the mining lease area remains in the exploration phase.  At present there are six producing wells within the TA-1 development area, and another 10 non-producing wells in the mining lease area waiting to be tied in, as shown on Figure 1.

A detailed description of the lands, interests and royalty burdens for this property is presented in Table 1.  All royalties and cess fees are paid by the licensee; ONGC.

 

Reserves

Total proved developed producing light oil reserves of 329 MSTB have been estimated for the six producing wells based on reservoir parameters derived from core data, as well as current production performance.

Total probable reserves of 2,772 MSTB have been assigned to this area based on the following methodology.

Probable developed producing incremental oil reserves of 391 MSTB have been estimated for the six producing wells, assuming slightly improved recovery factors over the proved case.

Probable developed non-producing oil reserves of 1,226 MSTB have been assigned to the 8 wells on the Tarapur # 6 structure and the Tarapur # 4 well.  These reserves were assigned based on reservoir parameters derived from core data, and analogy with currently producing wells.

Probable developed non-producing marketable non-associated gas reserves of 2,522 MMscf have been assigned to the well Tarapur # G based on reservoir parameters derived from log analysis.

Probable undeveloped reserves of 1,170 MSTB have been assigned to the six planned multi-stage frac horizontal development locations planned for the TA-1 development area.  These reserves were based on reservoir parameters derived from core data, in addition to analogy with currently producing wells.

 

Production

Production from this property currently averages 162 STB/d from six producing wells.

Under the probable forecast, production from the wells on the Tarapur 6 structure is expected to commence in January of 2012 at a combined rate of 600 STB/d.

Production from the well Tarapur 4 is expected to start in January of 2013 at a rate of 100STB/d, and production from the gas well Tarapur G is expected to commence in January of 2013 at a rate of 750 Mscf/d.

Production from the six probable undeveloped horizontal locations on the TA-1 structure is expected to commence in January of 2014 at a combined rate of 1200 STB/d.

All production rates are expected to decline over the lives of the wells towards an eventual economic limit.

Product Prices

A constant price of $74.60/STB for oil and $7.11/Mscf of gas have been utilized for all years in the economics analysis.

The prices have been calculated as follows:

The Company receives revenue based on total monthly production and the average Bonny Light price of that month. Therefore, every day of the month receives the same price, which is at a constant differential to the monthly average of the Bonny Light price index. Under SEC guidelines, the constant price is calculated as the average price 

 

 

  

  

  

 

differential applied to the unweighted arithmetic average of the first-day-of-the-month price for each of the 12 months proceeding the effective date.

 The gas price is based on current contractual arrangement the Company has in place to market the gas produced from this property.

These prices were calculated according to the new SEC pricing guidelines

Capital Expenditures

Total capital expenditures of $62,250,000 have been anticipated for this property in the Probable case, ($8,750,000 net to the Company), as presented in Table 3a.

Abandonment and restoration costs (net of salvage) of $600,000 ($84,000 net to the Company) in the proved case, and $2,200,000 ($308,000 net to the Company) in the proved plus probable case have been estimated for this area, as presented in Table 3b.

Estimates were based on experience with similar fields in the area, and discussions with the Company.

Operating Costs

Fixed costs have been estimated at $200,000 per year, plus $100,000 per year per active well.  Variable costs have been estimated at $4.50/STB and $0.35/Mscf.  These estimates are based on revenue statements supplied by the Company.Unassociated Document

Exhibit 10.1

 

American CryoStem Corporation

INCENTIVE STOCK OPTION PLAN

Plan Summary

 

This Incentive Stock Option Plan (the “Plan”) provides that an aggregate of up to 3,000,0001 shares of common stock, par value $0.001 per share (the “Common Stock”) of American CryoStem Corporation (the “Company”) may be optioned to officers and other employees, members of the Company’s board of directors (the “Board”), advisory board members and consultants collectively “employees”.  The plan provides authority for a Stock Option Plan Committee (the “Committee”) to select the employees of the Company, and its subsidiaries, to whom incentive stock options will be granted.    There are approximately 10 officers and directors of the Company plus other key employees eligible to receive options under the plan.  All officers may participate in the plan.

 

Following the statutory requirements of Section 422A of the Internal Revenue Code, the Plan provides that the Committee may establish the purchase price of the Common Stock at the time the option is granted.  The purchase price may be less than the fair market value of the Common Stock. The aggregate fair market value of the Common Stock for which any employee may be granted options in any calendar year shall not exceed $1,000,000 plus any unused limit carried over (as defined in Section 3(d)) to such year from any prior calendar year beginning on or after October 1, 2010.

 

The Plan terminates ten years from its effective date. All new options to be granted are nontransferable.  The Company is to receive no cash consideration for granting options under the Plan.  However, when an option is exercised, the holder is required to pay the option price, in cash or certified bank check, shares of Common Stock or in any combination of the above, for the number of shares of Common Stock to be issued upon exercise of the option unless the holder elects to receive cash or stock by exercise of stock appreciation rights.2

 

Under the plan, a Stock Appreciation Right (“SAR”) permits the holder of an option to elect to receive cash or a lesser amount of stock without payment, upon exercise of an option. The amount of cash receivable is the difference between the option price stated in the option and the fair market value of the Common Stock on the date of the exercise.  The lesser number of shares receivable is the number of shares which could be purchased with the cash receivable.  An important distinction between the exercise of an incentive stock option and the exercise of a SAR is that, upon the exercise of an SAR, the option holder need not pay the option price in cash. The shares or cash received by an optionee upon exercising an SAR, however, are subject to tax under Section 83.3

 

1.  Purpose of the Plan

This Incentive Stock Option Plan (hereinafter called the “Plan”) for American CryoStem Corporation (hereinafter called the “Company”) is intended to advance the interests of the Company by providing officers and other employees who have substantial responsibility for the direction and management of the Company with additional incentive to promote the success of the business, to increase their proprietary interest in the success of the Company, and to encourage them to remain in its employ. The above aims will be effectuated through the granting of certain stock options. It is intended that options issued under the Plan and designated by the Committee (as hereinafter defined) under Section 3(b) will qualify as Incentive Stock Options (hereinafter called “ISO’s”) under Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”), and the terms of the Plan shall be interpreted in accordance with this intention.

1 This figure is typically 10% of the number issued and outstanding.

2 This Plan does not provide for SAR’s.  Please let us know if you would like it to.

3 Supra.

 

  

  

  

 

2.  Administration of the Plan

The board of directors of the Company (the “Board”) shall appoint a Stock Option Plan Committee (hereinafter called the “Committee”) which shall consist of not less than two (2) members, at least one of whom shall be a member of the Board.  Subject to the provisions of the Plan, the Committee shall have plenary authority, in its discretion: (a) to determine the employees of the Company and its subsidiaries (from among the class of employees eligible under Section 3 to receive options under the Plan) to whom options shall be granted; (b) to determine the time or times at which options shall be granted; (c) to determine the exercise price of each option, which price shall not be less than the minimum specified in Section 5; (d) to determine (subject to Section 7) the time or times when each option shall become exercisable and the duration of the exercise period; and (e) to interpret the Plan and to prescribe, amend, and rescind rules and regulations relating to it.  The Board may from time to time appoint members of the Committee in substitution for members previously appointed and may fill vacancies, however caused, in the Committee; provided, however, that at all times at least one member shall be a member of the Board.  The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable.  All action of the Committee shall be taken by unanimous vote of its members. Any action may be taken by a written instrument signed by all the members of the Committee, and action so taken shall be fully as effective as if it had been taken by a unanimous vote of the members at a meeting duly called and held.  The Committee may appoint a secretary to keep minutes of its meetings and shall make rules and regulations for the conduct of its business, as it shall deem advisable.

 

3.  Eligibility and Limitations on Options Granted Under the Plan

 

(a)           Options will be granted only to persons who are employees of the Company or a subsidiary corporation of the Company (a “Subsidiary Corporation”) who agree, in writing, to remain in the employ of, and render services to, the Company or a Subsidiary Corporation.  The term “employees” shall include officers, directors, executives, and supervisory personnel, Board members, advisory board members and consultants as well as other employees of the Company or a Subsidiary Corporation of the Company.  The term “Subsidiary Corporation” shall, for the purposes of this Plan, be defined in the same manner as such term is defined in Section 424(f) of the Internal Revenue Code.

 

 (b)           At the time of the grant of each option under this Plan, the Committee shall determine whether such option is to be designated as an ISO.  If an option is to be so designated as an ISO, then the provisions of Section 7(d) of this Plan shall be made applicable to such option.  In addition, no option granted to any employee, who at the time of such grant, owns shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its subsidiaries, may be designated as an ISO unless, at the time of such grant, (i) the option price is fixed at not less than one hundred ten percent (110%) percent of the fair market value of the stock subject to the option, and (ii) exercise of such option is prohibited by its terms after the expiration of five (5) years from the date such is granted.

 

(c)           The aggregate fair market value of the stock for which any employee may be granted options designated as ISO’s in any calendar year (under this or any other stock option plan established by the Company or a Subsidiary Corporation) shall not exceed $1,000,000 plus any unused limit carryover (as defined in Section 3(d) hereof) to such year from any prior calendar year beginning on or after October 1, 2010.

 

(d)           The unused limit carryover from any such calendar year shall be one-half of any excess of $1,000,000 over the aggregate fair market value of the stock for which an employee was granted options that qualify (whether from their issuance or as a result of subsequent amendment and election by the Company) as ISO’s in any such calendar year (under this and all other stock option plans established by the Company or a Subsidiary Corporation).  The unused limit for any calendar year shall be carried forward for three (3) years.  ISO’s granted in any year shall be applied against the current year limitation first and then against the remaining unused limit carryovers to such year in the order of the calendar year in which the carryovers arose.

 

4.  Shares of Common Stock Subject to the Plan

There will be reserved for issuance upon the exercise of options to be granted from time to time under the Plan (subject to the provisions of Section 12) an aggregate of 3,000,000 shares of Common Stock, which shares may be issued in whole or in part, as the Board shall from time to time determine.  Any shares of Common Stock subject to an option under the Plan, which option for any reason expires or is terminated unexercised as to such shares, may again be subject to an option under the Plan.

 

  

  

  

 

5.  Option Price

The purchase price under each option issued shall be determined by the Committee at the time the option is granted, but in no event shall such purchase price be less than one hundred percent (100%) of the fair market value of the Common Stock on the date of grant.

 

The term “fair market value” shall be defined as either the average of the highest offer and lowest bid market price of said Common Stock on any public market if the stock of the Company is publicly traded, as of the date of the grant of the option, or, if there be no sales on such date, on the most recent date upon which such stock was traded, or if there is no market for the Common Stock of the Company, or the price at which the Company may be offering private investment into the Company, or finally, the book value of the Common Stock as of the end of the most recent preceding month as given on the books of the Company applying generally accepted accounting principles on a consistent basis giving effect to all accruals.

 

6.  Anti-Dilution

In the event that additional shares of Common Stock are issued pursuant to a stock split or a stock dividend, the number of shares of Common Stock then covered by each outstanding option granted hereunder shall be increased proportionately with no increase in the total purchase price of the shares then so covered, and the number of shares of Common Stock reserved for the purpose of the Plan shall be increased by the same proportion.  In the event that the shares of Common Stock from time to time issued and outstanding are reduced by a combination of shares, the number of shares of Common Stock then covered by each outstanding option granted hereunder shall be reduced proportionately with no reduction in the total price of the shares then so covered, and the number of shares of Common Stock reserved for the purposes of the Plan shall be reduced by the same proportion.  In the event that the Company should transfer assets to another corporation and distribute the stock of such other corporation without the surrender of Common Stock, and if such distribution is not taxable as a dividend and no gain or loss is recognized by reason of Section 355 of the Code, or some similar section, then the total purchase price of the shares covered by each outstanding option shall be reduced by an amount which bears the same ratio to the total purchase price then in effect as the market value of the stock distributed in respect of a share of the Common Stock, immediately following the distribution, bears to the aggregate of the market value  at such time of a share of the Common Stock and the stock distributed in respect thereof.  All such adjustments shall be made by the Committee, whose determination upon the same shall be final and binding upon the optionees.  No fractional shares shall be issued, and any fractional shares resulting from the computations pursuant to this Section 6 shall be eliminated from the respective option.  No adjustment shall be made for cash dividends or the issuance to stockholders of rights to subscribe for additional Common Stock or other securities.

 

7.  Period of Option and Certain Limitations on Right to Exercise

 

(a)           All options issued under the Plan shall be exercisable for such period as the Committee shall determine, but shall in no event be exercisable for more than ten (10) years from the date of grant thereof.

 

(b)           The period of the option, once it is granted, may be reduced only as provided for in Section 9 in connection with the termination of employment or death of the optionee or in Section 7(c) in the case of less than satisfactory performance.

 

(c)           Each option granted under this Plan shall become exercisable immediately following the date the option is granted.  Any option designated as an ISO shall be exercisable in full, or as to any part thereof, at any time following the date such option is granted, but only if the optionee chooses to exercise such option and to pay for such option in the manner set forth in Section 7(e) hereof (i.e., in cash or certified check or shares of the Common Stock, or any combination of the foregoing in an amount equal to the full option price of the shares being purchased).

 

Notwithstanding the foregoing, the Committee may, in its sole discretion, (i) prescribe longer time periods and additional requirements with respect to the exercise of an option and/or (ii) terminate in whole or in part such portion of any option as has yet become exercisable at the time of termination if it determines that the optionee is not performing satisfactorily the duties to which he was assigned on the date the option was granted or duties of at least equal responsibility.

  

  

  

 

(d)           No option granted by the Committee as an ISO may be exercised while there is outstanding in the hands of the optionee any ISO (whether granted under this Plan or any other stock option plan established by the Company or a subsidiary of the Company) which was granted before the granting of the ISO hereunder sought to be exercised.  For purposes of this Section 7(d), any ISO shall be treated as outstanding until exercised in full or expired.

 

(e)           Subject to the alternative settlement methods set forth in Section 7(h) hereof, the exercise of any option shall also be contingent upon receipt by the Company of cash or certified check to its order, shares of Common Stock, or any combination of the foregoing in an amount equal to the full option price of the shares being purchased.  For purposes of this paragraph, shares of Common Stock that are delivered in payment of the option price shall be valued at their fair market value determined under the method set forth in Section 5 of this Plan applied as of the date of the exercise of the option. However, in order to facilitate the accumulation of funds to enable employees to exercise their option, they will have the right, if they so elect, to direct the Company or a Subsidiary Corporation to withhold from their compensation regular amounts to be applied toward the exercise of the options.  Funds credited to the stock option accounts will be under the control of the Company until applied to the payment of the option price at the direction of the employee or returned to the employee in the event the amount is not used for purchase of shares under option, and all funds received or held by the Company under the Plan may be used for any corporate purpose, and no interest shall be payable to a participant on account of any amount held. Such amounts may be withdrawn by the participant at any time, in whole or in part, for any purpose.

 

(f)           No optionee or his legal representative or distributees, as the case may be, will be deemed to be a holder of any share subject to an option unless and until certificates for such shares are issued to him or them under the terms of the Plan.  No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.

 

(g)           In no event may an option be exercised after the expiration of its term.

 

(h)           As an alternative to payment in full by the optionee for the number of shares of Common Stock in respect of which an option is exercised, the Committee may provide alternative settlement methods as follows:

(i)           The Committee, in its discretion, may provide in the initial grant of any option that the optionee may elect either of the alternative settlement methods set forth in subsection (ii) below.

(ii)           The alternative settlement methods are for the optionee, upon exercise of the option, to receive from the Company:

(1)           Cash in an amount equal to the excess of the value of one share over the option price times the number of shares as to which the option is exercised; or

(2)           The number of whole shares of Common Stock having an aggregate value not greater than the cash amount calculated under Section 7(h)(ii)(1).  For purposes of determining an alternative settlement, the value per share shall be the “Fair market value” determined under the method set forth in Section 5 hereof, applied as of the date of the exercise of the option, or such other price as the Committee shall determine to be the fair market value of the Common Stock on the date of exercise.

(i)            An election of any of the alternative settlement methods provided for under Section 7 (h)(ii) shall be binding on the optionee, when made.  The optionee may elect to what extent the alternative settlement method elected shall be paid in cash, in Common Stock, or partially in Common Stock and partially in cash, provided that the aggregate value of the payments shall not be greater than the cash amount calculated under Section 7 (h)(ii)(1).  No fractional shares of Common Stock shall be issued, and the Committee shall determine whether cash shall be paid in lieu of such fractional share interest or whether such fractional share interest shall be eliminated.

 

  

  

  

 

(j)           The alternative settlement methods provided above in Section 7(h)(ii) shall not be available unless the cash amount calculated thereunder shall be positive, i.e., when the value of one share shall exceed the option price per share.

 

(k)           Exercise of an option in any manner, including an exercise involving an election of an alternative settlement method with respect to an option, shall result in a decrease in the manner of shares of Common Stock which thereafter may be available under the Plan by the number of shares as to which the option is exercised.

(1)           To the extent that the exercise of options by one of the alternative settlement methods provided for in Section (h)(ii) results in compensation income to the optionee, the Company will withhold from the amount due to the optionee utilizing such alternative settlement method, an appropriate amount for federal, state and local taxes.

 

8.  Assignability

 Each option granted under this Plan shall be transferable only by will or the laws of descent and distribution and shall be exercisable, during his lifetime, only by the employee to whom the option is granted.  Except as permitted by the preceding sentence, no option granted under the Plan or any of the rights and privileges thereby conferred shall be transferred, assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise), and no such option, right, or privilege shall be subject to execution, attachment, or similar process.  Upon any attempt to so transfer, assign, pledge, hypothecate, or otherwise dispose of the option, or of the right or privilege conferred thereby, contrary to the provisions hereof, or upon the levy of any attachment or similar process upon such option, right of privilege, the option and such rights and privileges shall immediately become null and void.

 

9.  Effect of Termination of Employment. Death or Disability

 

(a)           In the event of the termination of employment of an optionee by reason of (i) a discharge for cause or (ii) voluntary separation from the Company or any Subsidiary Corporation on the part of the optionee and without consent of the Company, any option or options theretofore granted to him under this Plan to the extent not theretofore exercised by him shall forthwith terminate.

 

(b)           In the event of the termination of employment of an optionee (otherwise than by reason of death or retirement of the optionee at his Retirement Date by the Company or by any Subsidiary Corporation employing the optionee at such time), any option or options granted to him under the Plan to the extent not theretofore exercised shall be deemed cancelled and terminated forthwith, except that, subject to the provisions of section (a) of this Section, such optionee may exercise any options theretofore granted to him, which have not then expired and which are otherwise exercisable within the provisions of Section 7(c) hereof, within three (3) months after such termination.  If the employment of an optionee shall be terminated by reason of the optionee’s retirement at his Retirement Date by the Company or by any Subsidiary Corporation employing the optionee at such time, the optionee shall have the right to exercise such option or options held by him to the extent that such options have not expired, at any time within three (3) months after such retirement. The provisions of Section 7(c) to the contrary notwithstanding, upon retirement, all options held by an optionee shall be immediately exercisable in full.  The transfer of an optionee from the employ of the Company to a Subsidiary Corporation or vice versa, or from one Subsidiary Corporation to another, shall not be deemed to constitute a termination of employment for purposes of this Plan.

(c)           In the event that an optionee shall die while employed by the Company or any Subsidiary Corporation or shall die within three (3) months after retirement at his Retirement Date (by the Company or by any Subsidiary Corporation) any option or options granted to him under this Plan and not theretofore exercised by him or expired shall be exercisable by the estate of the optionee or by any person who acquired such option by bequest or inheritance at any time within one (1) year after the death of the optionee. References hereinabove to the optionee shall be deemed to include any person entitled to exercise the option after the death of the optionee under the terms of this Section.

 

  

  

  

 

(d)           In the event of the termination of employment of an optionee by reason of the optionee’s disability, the optionee shall have the right, notwithstanding the provisions of Section 7(c) hereof, to exercise all options held by him, to the extent that options have not previously expired or been exercised, at any time within one (1) year after such termination. The term “disability” shall, for the purposes of this Plan, be defined in the same manner as such term is defined in Section 72(m)(7) of the Code.

 

(e)           For the purposes of this Plan, “Retirement Date” shall mean any date an employee is otherwise entitled to retire under the Company’s retirement plans, if any, and shall include normal retirement at age 65, early retirement at age 62, and retirement at age 60 after 30 years of service.

 

10.  Listing and Registration of Shares

Each option shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration, or qualification of the shares covered thereby upon any securities exchange or under any state or federal law or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or the issue or purchase of shares thereunder, such option may not be exercised in whole or in part unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

11.  Expiration and Termination of the Plan

Options may be granted under the Plan at any time or from time to time as long as the total number of shares optioned or purchased under this Plan does not exceed 3,000,000 shares of Common Stock. The Plan may be abandoned or terminated at any time by the Board except with respect to any options then outstanding under the Plan. No option shall be granted pursuant to the Plan after ten (10) years from the effective date of the Plan.

 

12.  Amendment of Plan

The Board may at any time and from time to time modify and amend the Plan (including such form of option agreement) in any respect; provided, however, that no such amendment shall: (a) increase (except in accordance with Section 6) the maximum number of shares for which options may be granted under the Plan either in the aggregate or to an individual employee; or (b) reduce (except in accordance with Section 6) the minimum option prices which may be established under the Plan; or (c) extend the period or periods during which options may be granted or exercised; or (d) change the provisions relating to the determination of employees to whom options shall be granted and the number of shares to be covered by such options; or (e) change the provisions relating to adjustments to be made upon changes in capitalization; or (f) change the method for selection of the Committee as provided by Section 2 hereof. The termination or any modification or amendment of the Plan shall not, without the consent of an employee, affect his rights under an option theretofore granted to him.

 

13. Applicability of Plan to Outstanding Stock Options

The Plan shall not affect the terms and conditions of any non-qualified stock options heretofore granted to any employee of the Company or a Subsidiary Corporation under any other plan relating to non-qualified stock options; nor shall it affect any of the rights of any employee to whom such a non-qualified stock option was granted.

 

14. Effective Date of Plan

This Plan shall become effective on the earlier to occur of the date of its adoption by the Board or its approval by the vote of the shareholders holding a majority of the issued and outstanding shares of Common Stock. If the Plan becomes effective by virtue of its adoption by the Board, the Plan shall cease to be effective unless such shareholder approval shall have been obtained within twelve (12) months after the adoption of the Plan by the Board.

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