November 17, 2000
Trinity Energy Resources, Inc.
16420 Park Ten Place
Suite 500
Houston, TX 77084
Attention: Mr. Dennis Hedke
Acting President and CEO
Dear Mr. Hedke:
As requested, we have made an estimate of the reserves and future
production and income attributable to certain leasehold interests of Diasu Oil
and Gas (Diasu) as of October 1, 2000. The proved reserves included in this
report conform to the guidelines of the Society of Petroleum Engineers (SPE) and
the Society of Petroleum Evaluation Engineers (SPEE). The probable reserves
conform to the guidelines of the SPE and SPEE. This report has been prepared
using constant prices and costs provided by Trinity Energy Resources, Inc.
(Trinity) and are detailed in this letter. The subject properties are located in
the states of Louisiana, Texas and Wyoming. The results of this study are
summarized below:
<TABLE>
<CAPTION>
Trinity Energy Resources, Inc.
Estimated Net Reserves and Future Income
Attributable to Certain Leasehold Interests of
Diasu Oil and Gas
Constant Case
As of October 1, 2000
--------------------------------------------------------------------------------
Proved
--------------------------------------------------------------------------------
Developed Total
Producing Behind Pipe Undeveloped Proved
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Remaining Reserves
Oil/Condensate - MBbls. 146 134 819 1,098
Gas - MMCF 812 1,394 5,337 7,544
Income Data
Future Gross Revenue $ 5,786,166 $ 7,254,980 $ 34,847,840 $ 47,888,980
Deductions 2,481,405 2,976,343 10,872,486 16,330,234
------------ ------------ ------------- -------------
Future Net Income $ 3,304,761 $ 4,278,638 $ 23,975,350 $ 31,558,750
Discounted FNI @ 10% $ 2,528,868 $ 2,028,579 $ 14,832,800 $ 19,390,240
From Landmark Graphics' "Aries" (totals shown above may not add to the summary cash flow
<PAGE>
Trinity Energy Resources, Inc.
November 17, 2000
Page 2
tables due to rounding).
Probable Probable Total
Behind Pipe Undeveloped Probable
----------- ----------- --------
Remaining Reserves
Oil/Condensate - MBbls. 29 298 327
Gas - MMCF 753 783 1,536
Income Data
Future Gross Revenue $ 2,926,569 $ 9,195,184 $ 12,121,750
Deductions 768,141 1,252,181 2,020,322
------------- ------------ -------------
Future Net Income $ 2,158,428 $ 7,943,003 $ 10,101,430
Discounted FNI @ 10% $ 1,187,723 $ 4,760,599 $ 5,948,322
</TABLE>
From Landmark Graphics' "Aries" (totals shown above may not add to the summary
cash flow tables due to rounding).
The discounted future net income shown above is based on a discount rate of
10 percent per annum compounded monthly. Future net income was discounted at
five other discount rates, which are compounded monthly. These data are shown on
each estimated projection of future production and income presented in a later
section of this report and are summarized as follows:
Discount Rate Total Total
Percent Proved Probable
------------------ -------------- --------
15 $ 16,037,790 $4,712,677
20 $ 13,569,900 $3,795,372
25 $ 11,683,320 $3,100,392
30 $ 10,198,740 $2,564,649
35 $ 9,003,290 $2,145,324
These data are presented for your information and should not be
construed as our estimate of fair market value.
Liquid Hydrocarbon Volumes are expressed in barrels which are
equivalent to 42 United States gallons. Gas Volumes are expressed in millions of
standard cubic feet (MMCF) at the contract temperature and pressure base of the
respective state.
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Trinity Energy Resources, Inc.
November 17, 2000
Page 3
Reserve Definitions
The proved reserves included herein conform to the definitions as set
forth in the Securities and Exchange Commission's Regulation S-X Part 210.4-10
(a) as clarified by various Commission Staff Accounting Bulletins and to the
definitions endorsed by the Society of Petroleum Engineers (SPE) and the Society
of Petroleum Evaluation Engineers (SPEE). Definitions of these reserves are
included immediately following this letter.
Estimate of Reserves
Estimates of reserves were prepared by the use of geological and
engineering methods generally accepted by the petroleum industry. The method or
combination of methods utilized in the analysis of each reservoir was tempered
by experience in the area, stages of development, quality and completeness of
basic data, and production history.
Where applicable, the volumetric method was employed for determining
the original quantities of hydrocarbons in place. Where sufficient geological
data was available, structural maps were prepared to delineate each reservoir
and isopachous maps were constructed to determine reservoir volumes. Electrical
logs, core analysis, and other available data were used to prepare these maps as
well as to determine representative values for porosity and interstitial water
saturation. Reserves based upon volumetric calculations or other methods such as
analogy with offset wells are usually subject to greater revision than those
based upon production and/or pressure performance data. Therefore, it may be
necessary to revise these estimates up or down in the future as more reliable
engineering data becomes available.
Reserves of depletion-type reservoirs or those whose performance
disclosed reliable decline in production-rate trends or other diagnostic
characteristics were estimated by the application of appropriate decline curves
or other performance relationships. In the analysis of production decline
curves, reserves were estimated only to a calculated economic limit.
Estimate of Future Producing Rates
Initial production rates were based on the current rates for those
reservoirs now on production. If no production decline trend was established, a
decline profile analogous to similar wells was used. If a decline trend was
established, this trend was used as the basis for estimating future rates.
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Trinity Energy Resources, Inc.
November 17, 2000
Page 4
Product Prices
Liquid Prices
Trinity provided the liquid hydrocarbon prices. For the purpose of
this report, the prices were held constant over the life of the reserves with no
future price escalation. The resulting overall average price for oil and
condensate reserves is $23.00 per barrel. The oil and condensate reserves
account for 52.7 percent of the future gross income from all proved reserves.
Gas Prices
Trinity provided the gas prices. For the purpose of this report, the
prices were held constant over the life of the reserves with no future price
escalation. The resulting overall average price for gas reserves is $3.00 per
MCF. Gas reserves account for 47.3 percent of the future gross income from all
proved reserves.
Income Data
The future gross revenue is determined before deduction of production
taxes. Future net income is determined after deduction of the normal costs of
operating the wells, recompletion and development costs. The operating costs,
recompletion and development costs were held constant for the life of the
reserves with no future cost escalation due to inflation. The future net income
is before the deduction for state and federal income taxes and has not been
adjusted for outstanding loans which may exist. It does not include any
adjustment for cash on hand or undistributed income.
Table A presents a summary of the 8/8ths reserves, prices and
interests for the subject properties by state, field and lease. Table B presents
a summary of net reserves and income data for the subject properties by state,
field and lease. Table C presents a summary of the proved net reserves and
income data ranked by discounted future net income. Tables 1 through 7 are the
grand summaries and Tables 8 through 55 are the field summaries and individual
well cash flow tables. A production decline curve for the producing properties,
which graphically illustrates past hydrocarbon production history and our
estimated projection of future production, follows at the end.
General
The reserves included in this report are estimates only and should
not be construed as being exact quantities. They may or may not be actually
recovered and, if recovered, the revenues therefrom and the actual costs related
thereto could be more or less than the estimated amounts. Because of
governmental policies and uncertain ties of supply and demand, the actual sales
volumes and the prices received from the reserves, along with the costs incurred
in recovering such reserves, may vary from those assumptions included in this
report. Also, estimates of reserves may increase or decrease as a result of
future operations.
<PAGE>
Trinity Energy Resources, Inc.
November 17, 2000
Page 5
We are qualified to perform engineering evaluations and do not claim
expertise in accounting or legal matters. As in all aspects of oil and gas
evaluation, there are uncertainties inherent in the interpretation of
engineering data and therefore, our conclusions necessarily represent only our
best informed professional judgments.
The titles to the properties have not been examined by R. A. Lenser
and Associates, Inc. nor has the actual degree or type of interest owned been
independently confirmed. The data used in our estimates were obtained from
Trinity and were accepted as accurate. For the purposes of this report, a field
inspection of the properties was not performed nor was the mechanical operation
or condition of the wells and their related facilities examined. We have not
investigated possible environmental liability related to the properties and,
therefore, our estimates do not include any costs which may be incurred due to
such possible liability.
We are independent petroleum engineers and geologists; we do not own
an interest in these properties and are not employed on a contingent basis.
Basic geologic and field performance data together with our engineering work
sheets are maintained on file in our office and are available for review.
Very truly yours,
R. A. LENSER AND ASSOCIATES, INC.
Bill O. Wilbanks
Registered Professional Engineer
PE No. 48568
RAL/lmh
