<PAGE>
Exhibit 99.5
[LETTERHEAD OF MADISON ENERGY ADVISORS, INC.]
May 3, 2000
Mr. John Penton
Canaan Energy Corporation
119 North Robinson, Suite 600
Oklahoma City, OK 73102-4605
Re: Appraisal Value - Coral Reserves Limited Partnerships
Dear Mr. Penton:
As requested, Madison Energy Advisors, Inc. (Madison) has performed the analysis
necessary to estimate the appraisal value for the properties held by eight Coral
Reserves Limited Partnerships. The appraisal value values the properties as if
sold in an orderly manner in a reasonable period of time less the cost of sale
and in a manner consistent with industry practice. The attached Exhibit "A"
summarizes our estimate of the appraisal value of the properties as of September
30, 1999, as adjusted for pricing changes as described below.
The figures shown are derived from two primary sources, the audit review of the
Netherland, Sewell & Associates, Inc. (NSAI) reports, revised for oil and gas
prices as discussed below, and our knowledge of the current market for producing
oil and gas properties.
Audit Review
------------
Madison performed an audit review of the major value properties contained in the
eight Coral Reserves Limited Partnerships mentioned above. In performing the
audit review, Madison conducted an evaluation of the methods and procedures
utilized by NSAI in the preparation of the estimates of proved reserves and
associated future net revenue and performed tests and procedures considered
necessary to render the opinions set forth herein. Madison accepted without
independent verification the accuracy and completeness of information and data
provided by NSAI including, but not limited to, oil and gas production,
interests, and development and operating costs.
These major value properties are defined as those whose combined value
represents approximately eighty percent of the total future net revenue
discounted at ten percent per annum of all eight partnerships summed together.
In performing this audit review, Madison relied on reports prepared by NSAI for
Coral Reserves between November 16 and 22, 1999 with an effective date of
September 30, 1999. Madison performed this audit review in NSAI's Dallas office
and met with three engineers and a geologist that evaluated the properties for
the September 30, 1999 reports.
Based on the audit review, it is Madison's opinion that the estimates of the
reviewed oil and gas reserves and the associated future net revenues prepared by
NSAI effective September 30, 1999 are reasonable in the aggregate and were
prepared in accordance with generally accepted petroleum engineering and
evaluation principles.
<PAGE>
Appraisal Value-Coral Reserves Limited Partnerships
May 3, 2000/Page 2
Since the time the NSAI reports were prepared, there have been substantial
changes in oil and gas prices. At Madison's request, NSAI ran a sensitivity
case to their September 30, 1999 reports to reflect current pricing as reported
in Madison's Quarterly Pricing Poll for Active Middle Market buyers, effective
April 1, 2000 ($25.97/bbl for West Texas Intermediate oil and $2.74/MCF for
Henry Hub gas). Madison has selected four companies active in the acquisition
and divestment of producing oil and gas properties to poll for their pricing
forecasts. Over the past several years, more than 90 percent of all reported
properties have been within these companies' target range of $10 million to $500
million. These prices are adjusted to reflect actual revenues received by the
partnerships compared to historical spot prices and then escalated using the
escalation rates reported in the Quarterly Pricing Poll. A copy of the
Quarterly Pricing Poll showing prices and escalation rates is attached.
Market Knowledge
----------------
Madison sells several hundred million dollars of properties each year. Our
market knowledge is augmented by a full-time staff that dedicates hundreds of
man-hours each week to studying and analyzing the domestic producing property
market. We further augment our own findings by receiving and digesting every
significant valuation publication in the industry.
From this work the firm has developed a substantial understanding of the past
and current markets, and is able to make some legitimate forecasts for the
immediate future.
In determining the estimated market value for these properties, several
assumptions were made:
. The individual partnerships would be sold separately, thereby putting
individual package values in the $1 million to $8 million range;
. The nature of these reserves categorizes them as "lower tier." In the eight
partnerships there are approximately 600 properties;
. Lower Tier properties will generally receive a risked value in this market
discounting the future net revenues at 20%;
. Buyers of packages in these sizes will only allocate so much of their
acquisition cost to non-producing reserves;
. Risk factors for non-producing reserves were applied as follows: PDNP - 65%;
PUD - 35%. These factors are derived from the general dollar size of the
packages, the reason for the reserve category and other less tangible
factors.
The estimation of market value is an inherently imprecise process, part science
and part art. While we are confident that the values we have calculated
represent a "most likely" market value, however, there is no assurance that the
properties would actually sell for our estimate of appraisal value.
We trust that this report meets your requirements at this time. Please don't
hesitate to let me know if you need any additional information or greater
detail.
The values are as of September 30, 1999. Appraised values at a subsequent date
should be adjusted for net revenues since that time.
<PAGE>
Appraisal Value-Coral Reserves Limited Partnerships
May 3, 2000/Page 3
We appreciate the opportunity to provide you with this report, and look forward
to working with you in the future.
Best regards,
/s/ Geoffrey G. Roberts
Geoffrey G. Roberts, PE
President
Enclosure
<PAGE>
EXHIBIT "A"
Appraisal Value
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Total Proved Developed Developed Undeveloped Sales Net Value
Reserves Producing Non-Producing Commission &
Partnership PW(20) PW(20) PW(20) EMV@65% PW(20) EMV@35% Total EMV Transaction Costs (Rmk 1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CR 1990 LP 1,643 1,544 36 23 62 22 1,589 79 1,510
CR 1991 LP 2,110 2,012 33 21 65 23 2,056 103 1,953
CR 1992 LP 4,160 3,874 138 90 148 52 4,016 201 3,815
CR 1993 LP 3,735 3,716 44 29 -25 -9 3,736 187 3,549
CR 1993-I LP 1,643 1,652 16 10 -26 -9 1,653 83 1,571
CR 1995 LP 4,876 4,279 187 122 410 144 4,544 227 4,317
CR 1996 LP 6,230 5,095 632 411 503 176 5,682 284 5,398
CR 1996-I LP 4,854 4,096 216 140 542 190 4,426 221 4,205
=================================================================================================================
29,251 26,268 1,302 846 1,679 588 27,702 1,385 26,317
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Remark 1. The Net Value represents the value to be received
by the partnerships after the payment of estimated
transaction costs of 5%, including commissions on sale.
[LOGO of Madison Energy Advisors, Inc.]
The Creative Transactions Advisors(TM)
<PAGE>
[LOGO OF MADISON ENERGY ADVISORS, INC.]
Madison Energy Advisors, Inc.
The Creative Transaction Advisors(TM)
QUARTERLY PRICING POLL
Number 2
================================================================================
2000 STARTS WITH A BANG!
Madison is proud to report that 2000 is shaping up to be our best year ever.
During the first quarter, we have closed deals for Burlington Resources,
Redstone Oil & Gas and EOG Resources. Pending is our Ecuadorian sale in which
Madison is representing CMS Oil and Gas.
To kick off the second quarter, Madison is looking forward to working with the
following clients:
Client Asset Concentration
------ -------------------
Burlington Texas & New Mexico
Resources
UPR South Louisiana
Peoples Colorado
Energy
Production
Addington Texas
Undisclosed Colombia, S. America
================================================================================
--------------------------------------------------------------------------------
SPOT WTI CRUDE & SPOT HENRY HUB
[GRAPH]
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
Personnel Profile - Bill Marko - Vice President - Special Projects
--------------------------------------------------------------------------------
Madison is very pleased to welcome William Marko as Vice President -
Special Projects. Bill graduated magna cum laude from Tulane University with a
Bachelor's Degree in Mechanical Engineering and a Master's Degree in Petroleum
Engineering. He is a registered Professional Engineer and a member of the
Society of Petroleum Engineers. He has published articles in Natural Gas and Oil
& Gas Investor. Insights from his speeches have been published in Gas Daily, Oil
& Gas Investor, Oil and Gas Journal and Oil & Gas Interests.
Bill's career began with Mobil Exploration & Production in 1980. During
his 18 year tenure with Mobil, he served in various Engineering functions:
Operations Manager; Gulf of Mexico Acquisitions and Sales Manager; U.S. E&P
Acquisitions & Trades Manager; Worldwide New E&P Advisor and Asset Enhancement
Director.
Bill moved to Houston in 1998 and worked for the past two years for Navigant
Consulting, Inc. (formerly Sterling Consulting Group) focusing on acquisition
and divestment consulting, oil and gas company analysis and business
development.
Bill has expertise in all areas of acquisition and divestment analysis,
corporate M&A analysis, portfolio management and business development. At
Madison, he is currently working on e-commerce, commercial project management,
international projects and business development.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Price Forecasts
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
ACTIVE MIDDLE MARKET
========================================================================================================
Current (04/1/00) Last Quarter (01/1/00)
==================================================================================================
OIL (WTI Spot) GAS (HH Spot) Oil (WTI Spot) GAS(HH Spot)
==================================================================================================
$/Bbl Esc. $/MMBtu Esc. $/Bbl Esc. $/MMBtu Esc.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
========================================================================================================
1999
--------------------------------------------------------------------------------------------------------
2000 25.97 2.74 22.23 2.42
--------------------------------------------------------------------------------------------------------
2001 22.53 -13.25% 2.77 1.09% 20.92 -5.89% 2.49 2.89%
--------------------------------------------------------------------------------------------------------
2002 21.40 -5.02% 2.71 -2.17% 21.05 0.62% 2.54 2.01%
--------------------------------------------------------------------------------------------------------
2003 21.44 0.19% 2.77 2.21% 21.43 1.81% 2.58 1.57%
--------------------------------------------------------------------------------------------------------
2004 21.54 0.47% 2.83 2.17% 21.83 1.87% 2.62 1.55%
--------------------------------------------------------------------------------------------------------
Then 1.00% 2.44% 1.75% 2.13%
========================================================================================================
Cap 25.77/None* 3.58/None* 26.33/None* 3.58/None*
========================================================================================================
Costs 1.75% To 2000 - 1.0%, then 1.60%
========================================================================================================
*Average of the Active Middle Market companies that use a cap. (One does not).
-------------------------------------------------------------------------------------------------
</TABLE>
Madison has selected four companies active in the acquisition and
divestment of producing oil and gas properties to poll for their forecasts. Over
the past several years, more than 90% of all reported properties have been
within these companies' target range of $10MM to $500MM. For confidentiality
purposes, we do not release the names of these companies.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
HOUSTON ENERGY BANKS
=======================================================================================================
=================================================================================================
Current (04/1/00) Last Quarter (01/1/00)
==================================================================================================
OIL (WTI Spot) GAS (HH Spot) Oil (WTI Spot) GAS(HH Spot)
==================================================================================================
$/Bbl Esc. $/MMBtu Esc. $/Bbl Esc. $/MMBtu Esc.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
========================================================================================================
1999
--------------------------------------------------------------------------------------------------------
2000 20.13 2.32 18.88 2.33
--------------------------------------------------------------------------------------------------------
2001 19.02 -5.51% 2.334 0.86% 18.58 -1.59% 2.34 0.43%
--------------------------------------------------------------------------------------------------------
2002 18.84 -0.95% 2.39 2.14% 18.91 1.78% 2.40 2.56%
--------------------------------------------------------------------------------------------------------
2003 19.18 1.80% 2.45 2.51% 19.28 1.96% 2.45 2.08%
--------------------------------------------------------------------------------------------------------
2004 19.60 2.19% 2.50 2.04% 19.68 2.07% 2.50 2.04%
--------------------------------------------------------------------------------------------------------
Then 2.00% 2.25% 2.00% 2.25%
========================================================================================================
Cap 24.50 3.31 26.67/None* 3.58/None*
=======================================================================================================
Costs 2000 - 0%, 2001 - 1.88%, then 2.25% To 2001 - 0% then 2.25%
=======================================================================================================
*Average of the three Energy Banks that use a cap. (One does not).
-------------------------------------------------------------------------------------------------------
</TABLE>
This table reflects the results of a poll taken quarterly by Madison of the
four largest reserve-based energy lenders in Houston. These banks have been
leaders in domestic energy lending for more than 15 years.
<PAGE>
Personnel Profile - Florence S. Hughes - Senior Engineering Technician
Flo is a graduate of the University of Oklahoma with a Bachelor of Science
(With Distinction) in Geology. She is a member of Phi Beta Kappa and the
recipient of a Socony-Mobil geology scholarship for her senior year at the
University. Her career began in Dallas, Texas with Geochemical Surveys. She
moved to West Texas with her family and was employed by Russell Engineering in
Abilene and Shell Oil Company and Williamson Petroleum Consultants, Inc. in
Midland.
During 31 years with Williamson she established their data processing, data
and standards management, and engineering technician departments. She served
Williamson from 1990 to August 1999 as Chief Operating Officer and Executive
Vice President with responsibility for directing the engineering, data
processing, technical and clerical staffs.
Mrs. Hughes is proficient with software and is versatile and knowledgeable
in all phases of property evaluation. She has performed oil and gas reservoir
studies, evaluations of oil and gas reserves for property acquisition and
divestiture and has experience in the United States, Canada and South America,
with the majority of her work in Appalachia, the Permian Basin, and the Gulf
Coast. She is a member of the American Association of Petroleum Geologists,
Society of Petroleum Earth Scientists, Society of Petroleum Engineers, Society
of Petroleum Evaluation Engineers, Houston Geological Society and is a certified
petroleum geologist.
Flo joined Madison in August, 1999.
================================================================================
<TABLE>
<CAPTION>
AGGRESSIVE AND CONSERVATIVE PRICE FORECASTS
Active Middle Market Houston Energy Banks
------------------------------------------------------------- ----------------------------------------------------------
Most Conservative Most Aggressive Most Conservative Most Aggressive
------------------------------ ------------------------------ ------------------------------ ---------------------------
OIL GAS OIL GAS OIL GAS OIL GAS
-------------- -------------- --------------- ------------- --------------- ------------- -------------- -------------
$/Bbl Esc. $/MM Esc. $/Bbl Esc. $/MM Esc. $/Bbl Esc. $/MM Esc. $/Bbl Esc. $/MM Esc.
------- ----- ------ ------ ------- ------ ------ ------ ------- ------ ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 27.00 2.60 25.50 2.65 22.00 2.23 20.00 2.40
----------------------------------------------------------------------------------------------------------------------------------
2001 21.00 -22.2% 2.60 0.0% 23.00 -9.8% 2.78 4.9% 20.00 -9.1% 2.26 1.3% 19.00 -5.0% 2.45 2.1%
----------------------------------------------------------------------------------------------------------------------------------
2002 18.00 -14.3% 2.25 -13.5% 23.75 3.3% 2.92 5.0% 18.00 -10.0% 2.33 3.1% 19.50 2.6% 2.50 2.0%
----------------------------------------------------------------------------------------------------------------------------------
2003 18.00 0.0% 2.25 0.0% 24.50 3.2% 3.07 5.1% 18.00 0.0% 2.40 3.0% 20.00 2.6% 2.50 0.0%
----------------------------------------------------------------------------------------------------------------------------------
2004 18.00 0.0% 2.25 0.0% 25.25 3.1% 3.22 4.9% 18.00 0.0% 2.70 12.5% 20.60 3.0% 2.50 0.0%
===================================================================================================================================
Then 0.0% 0.0% 3.0% 5.0% 0.0% 3.0% 3.0% 0.0%
===================================================================================================================================
Cap 18.00 2.25 35.00 4.50 18.00 3.50 25.00 2.50
===================================================================================================================================
Costs 0.0% 3.0% 1.5% 1.5%
===================================================================================================================================
</TABLE>
The table above represents the most aggressive and most conservative
forecasts as of April 1. Included in this table are the forecasts that we have
judged to be either highest or lowest comparatively over their entire lives and
not necessarily in any particular year. We have chosen companies that remain
most aggressive or conservative throughout the years polled and have not
intermixed companies from year to year.
<TABLE>
<CAPTION>
HISTORICAL PRICE
-----------------------------------------------------------------------------------------------------------------
LIGHT SWEET CRUDE NATURAL GAS
-----------------------------------------------------------------------------------------------------------------
(West Texas Intermediate) Monthly Pipeline Nominations NYMEX (Henry Hub)
-----------------------------------------------------------------------------------------------------------------
--------- Daily Spot- 12-Mo. Henry Gulf HH Waha National 12 Mo Daily Strip
Month Spot Posted Posted Strip Hub Coast GC Hub Average Strip Spot Spot
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oct 14.38 11.89 2.49 14.71 2.07 2.00 0.07 1.91 1.99 2.27 1.89 0.38
-------------------------------------------------------------------------------------------------------------------------
Nov 12.91 10.37 2.54 14.36 2.01 1.95 0.06 1.93 2.02 2.27 2.12 0.15
-------------------------------------------------------------------------------------------------------------------------
1998 Dec 11.28 8.65 2.63 12.76 2.12 2.05 0.07 2.04 2.13 2.03 1.72 0.31
==========================================================================================================================
Jan 12.47 9.88 2.59 13.13 1.80 1.74 0.06 1.74 1.83 2.01 1.85 0.16
-------------------------------------------------------------------------------------------------------------------------
Feb 12.01 0.30 2.71 12.71 1.81 1.76 0.05 1.71 1.80 2.04 1.77 0.27
-------------------------------------------------------------------------------------------------------------------------
Mar 14.66 12.05 2.61 14.70 1.63 1.60 0.03 1.57 1.63 2.06 1.79 0.27
-------------------------------------------------------------------------------------------------------------------------
Apr 17.31 14.61 2.73 16.56 1.86 1.83 0.03 1.72 1.93 2.33 2.15 0.18
-------------------------------------------------------------------------------------------------------------------------
May 17.79 15.18 2.61 17.19 2.36 2.31 0.05 2.21 2.31 2.44 2.25 0.19
-------------------------------------------------------------------------------------------------------------------------
Jun 17.89 15.33 2.56 17.69 2.23 2.19 0.04 2.14 2.20 2.48 2.30 0.18
-------------------------------------------------------------------------------------------------------------------------
July 20.07 17.47 2.60 19.50 2.27 2.24 0.03 2.21 2.25 2.46 2.31 0.15
-------------------------------------------------------------------------------------------------------------------------
1999 Aug 21.26 18.56 2.70 20.27 2.62 2.58 0.04 2.52 2.59 2.70 2.79 (0.09)
-------------------------------------------------------------------------------------------------------------------------
Sept 23.88 20.94 2.94 21.50 2.90 2.85 0.05 2.79 2.86 2.67 2.54 0.13
-------------------------------------------------------------------------------------------------------------------------
Oct 22.64 19.94 2.70 21.31 2.53 2.49 0.04 2.45 2.53 2.71 2.72 (0.01)
-------------------------------------------------------------------------------------------------------------------------
Nov 24.56 22.27 2.59 22.12 3.04 3.00 0.04 2.82 3.06 2.52 2.22 0.30
-------------------------------------------------------------------------------------------------------------------------
Dec 26.06 23.23 2.85 22.68 2.10 2.08 0.02 2.03 2.15 2.46 2.36 0.10
=========================================================================================================================
Jan 27.27 24.11 3.16 23.54 2.33 2.31 0.02 2.22 2.38 2.50 2.42 0.08
-------------------------------------------------------------------------------------------------------------------------
Feb 29.34 26.54 2.80 25.25 2.59 2.56 0.03 2.46 2.67 2.69 2.65 0.01
-------------------------------------------------------------------------------------------------------------------------
Mar 29.99 26.44 3.66 25.77 2.59 2.56 0.03 2.48 2.58 2.94 2.79 0.15
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[MADISON ENERGY ADVISORS, INC. LOGO] BULK RATE
U.S. POSTAGE
Q P P PAID
U R O Address Services Requested KWIK KOPY
A I L CYPRESS, TX
R C L PERMIT NO. 561
T I
E N
R G
L
Y
SPE Business Development
Study Group
The next meeting of the SPE GCS Business Development
Study Group will be held on Wednesday, May 24, 2000 at
5:30 pm at the Four Seasons Hotel in Downtown Houston.
"How to Do Business with the Majors" with feature speakers
J.R. Kahn, Asset Enhancement Manager for ExxonMobil
Production Company; David F. Work, Regional President of
BP Amoco Corporation; and Steve H. McVeigh, Vice
President-Production for Shell Exploration & Production
Company.
Hors d'oeuvres will be served and drinks will be available.
Each speaker will spend about ten minutes giving an informal
talk about this company, and there will be plenty of time for
questions and answers. Past meetings have been at or
close to sell-outs, and we are expecting a large crowd at
this one, so please make your reservations early. Please
note: No-shows will be billed.
Date: Wednesday, May 24, 2000
Location: Four Seasons Hotel, Downtown Houston
Time: 5:30 p.m. to 8:00 p.m.
Cost: $25 per person pre-registered; $30 for walk-ins
(No-shows will be billed)
Registration: www.spe.org or call (713) 779-9595
Deadline: Noon, Friday, May 19
We'd like to thank our March speakers for a successful
meeting. Grant Henderson, President of Belco Energy
Corporation and Bruce Vincent, Senior Vice President of
Swift Energy Company were well-received by the group.
The Weekly Market Review newsletter is published every Monday morning by
Email to our friends and clients. The publication contains the prior weeks
prices, rig counts, historical prices and a short summation of last weeks
breaking news stories. This is certainly geared toward the oil industry but not
particularly M&A. If you would like to receive this publication please Email
[email protected].
