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UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
TBX RESOURCES, INC.
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(Name of Small Business Issuer in its charter)
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Texas 75-2592165
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
12300 Ford Road, Suite 265, Dallas, TX 75234
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(Address of principal executive offices) (Zip Code)
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Issuer's telephone number (972) 243-2610
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Securities to be registered pursuant to Section 12(b) of
the Act: Not Applicable.
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Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock
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(Title of Class)
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TABLE OF CONTENTS
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DESCRIPTION OF BUSINESS...........................................................................................1
MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........................................................7
DESCRIPTION OF PROPERTIES........................................................................................12
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS....................................................17
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS..................................................17
EXECUTIVE COMPENSATION...........................................................................................18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................19
SECURITIES BEING REGISTERED......................................................................................19
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................................................20
LEGAL PROCEEDINGS................................................................................................20
RECENT SALES OF UNREGISTERED SECURITIES..........................................................................20
INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................................................21
FINANCIAL STATEMENTS.............................................................................................22
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DESCRIPTION OF BUSINESS
BACKGROUND
TBX Resources, Inc., was incorporated in the state of Texas in March,
1995, by our president, Mr. Tim Burroughs. Our primary focus has been to acquire
producing oil and gas properties with opportunities for future development.
Prior to acquiring a property, we analyze the previous production and operating
history of the property, as well as the production history and related operating
procedures for similar wells producing from the same formations in the general
area. By acquiring producing properties which respond positively to improved
production practices and enhanced recovery techniques, we have built an
inventory of infield development drilling locations.
As of February 29, 2000, our company had total assets of $3,027,211.00,
of which net oil and gas properties amounted to $2,346,054.00 or 77.5% of our
total assets. Our accumulative losses through February 29, 2000, total
$1,984,205.00. Our ratio of current assets to current liabilities is 1.5:1; our
company has no long term debt. As of February 29, 2000, our shareholders equity
was a positive $2,859,534.00.
Our company has experienced losses over the past years. However, our
management is projecting a decrease in general and administrative expenses from
the past fiscal year, an increase in prices obtained for our oil produced from
the prior fiscal year and increase in the total barrels of production, due to
more of our wells being brought on-line. Our management believes that with the
projected lower general and administrative expenses, increases in production and
higher oil prices, our company should achieve profitable results for the fiscal
year ending November 30, 2000. However, this probability is dependent upon many
factors, some of which are not within our control and there can be no assurance
that our actual results will be profitable.
Mr. Burroughs' experience in the oil and gas industry began as a
financier for an exploration company, where he arranged drilling capital to meet
the company's annual drilling budget. As the major oil and gas companies focused
their investment capital offshore and overseas, and high quality domestic
producing properties became available, Mr. Burroughs developed his strategy for
building an oil and gas production company. Over time, Mr. Burroughs cultivated
relationships with various oil and gas engineers, geologists and operating
personnel with backgrounds in oil and gas fields of eastern Texas and western
Louisiana. These relationships resulted in the development of an informal
network of consultants and associates who have assisted TBX to locate and
qualify properties for acquisition by TBX Resources, perform workover operations
on the acquired wells and analyze the daily production operations to maximize
the production of the acquired leases.
As a result of his operating history in East Texas, Mr. Burroughs
became acquainted with the oil and gas fields along with the numerous field
operators and service companies serving this area. Through these acquaintances
with several East Texas field operators in the past, Mr. Burroughs has been made
aware of oil and gas acquisition opportunities in east Texas which meet our
criteria. Although we have no specific, formal agreements with any operators or
service providers to provide us with acquisition opportunities, our familiarity
with the area and the persons involved in the oil and gas industry in this area
establishes us as a company that is interested and
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capable of purchasing producing properties in this area. Because of our
reputation in this area, we are presented with acquisition opportunities that we
can develop.
Our goal is to be a publicly traded, independent oil and gas
exploration and production company which can take full advantage of
opportunities resulting from the major oil companies' divestiture of domestic
oil and gas properties. In particular, most major oil companies are currently
more interested in devoting their exploration dollars toward the development of
oil and gas fields that are not located in the United States, primarily because
of the assumption by the major oil companies that domestic oil and gas
properties have been significantly depleted. In addition, due to the extent of
the development of domestic oil and gas properties, it is more likely that a
significant new discovery in the oil and gas industry would likely be conducted
in those areas that have not been so heavily developed, generally being
properties that are not contained within the United States. Because major oil
companies are more interested in developing their overseas holdings, they often
sell their domestic properties at prices that are attractive to us, especially
since we have significantly lower administrative costs than large oil companies.
Due to our lower infrastructure costs, we believe that our costs of owning and
operating domestic oil and gas properties is lower than those same costs as
experienced by major oil companies.
PREVIOUS JOINT VENTURES
Since our inception, we have acted as the joint venture manager of 11
Joint Ventures, all of which have been located in east Texas and western
Louisiana. We remain the Joint Venture Manager of only one of these joint
ventures, the Bethany Field Joint Venture. The remaining joint ventures we
developed were essentially "rolled up" into our company in that we exchanged
shares of our common stock in return for our joint venture partners' interest in
the properties developed by their previous joint ventures.
Our previous joint ventures were structured relatively similarly. In
particular, each joint venture acquired approximately 90% of the working
interest, or expense bearing interest, in various producing oil and gas
properties, with the joint venture generally entitled to a 75% net revenue
interest or interest in production from the joint venture properties. Typically,
the joint venture properties had producing oil and gas wells on them at the time
the prospects were acquired by the joint venture.
Generally, our company, acting as the joint venture manager, retained a
10% carried working interest in the joint venture properties, meaning that the
joint venture manager paid 10% of well operating costs and approximately 1% of
other costs, with the other costs being borne or "carried" by the other joint
venture participants. This carried working interest generally entitled us to
receive 5% of revenues from a joint venture property.
The joint venturers typically entered into turn-key rework agreements
with us whereby we agreed to conduct various rework operations on the joint
venture wells with the intent of increasing production therefrom. We generally
agreed to conduct these reworking operations on a "turn-key" or fixed basis,
meaning that we agreed to conduct the activities for a fixed price. If the
actual costs associated with conducting these activities were in excess of this
fixed price, we suffered a loss; if the actual costs incurred were less than the
fixed price, we experienced a profit.
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Finally, we generally received a management fee of approximately 9%
from the joint venture for our efforts in managing the joint venture. In
addition, we were reimbursed for the organizational costs associated with
establishing each joint venture, which costs included legal fees, accounting
charges and other similar items.
WELLS HELD BY THE COMPANY
As more particularly described in the description of properties
section, we own or operate 61 wells located in Gregg, Hopkins, Franklin, Panola
and Wood Counties, Texas. Of these 61 wells, 8 wells have been designated as
injection wells and 3 wells have been designated as water supply wells. In
addition, 6 wells are currently producing oil. The remaining 52 wells are either
currently shut-in, scheduled to be brought back into production or are to be
designated as injection wells. During the next twelve months, we hope to be able
to bring some of the wells that are currently shut-in on-line so that the same
will begin to produce oil. However, our ability to re-open these wells is
dependent upon us obtaining sufficient financing to pay the costs associated
with re-opening these wells and operating the same once re-opened.
DEVELOPMENT AND EXPLORATION ACTIVITIES
Economic factors prevailing in the oil and gas industry change from
time to time. The uncertain nature and trend of economic conditions and energy
policy in the oil and gas business generally make flexibility of operating
policies important in achieving desired profitability. We intend to evaluate
continuously all conditions affecting our potential activities and to react to
those conditions as we deem appropriate from time to time by engaging in
businesses most profitable for us. Recently, economic factors have influenced
major integrated oil and gas companies to consolidate and restructure. In
particular, most major oil and gas companies believe that the best way to
maximize profitability in the exploration and production area of the oil and gas
industry is to focus on non-domestic oil and gas properties due to the perceived
higher costs associated with bringing a barrel of domestic oil and gas
equivalent to the market, as compared to foreign oil and gas properties. Because
foreign oil and gas properties, although having the potential for huge returns,
require large amounts of money for development, several major oil and gas
companies have found that they must consolidate with other oil and gas companies
to have the resources available to be able to afford the costs associated with
foreign exploration. In addition, by selling their domestic production, major
oil and gas companies generate cash which can be used for their foreign
operation. If such activities continue, our management believes that we may have
opportunities to acquire domestic producing properties with developmental
drilling potential. This is because we do not have the numerous employees and
equipment that major oil and gas companies have, together with the related
expense. In other words, we think the revenue generated from domestic oil and
gas properties that we either currently own or can acquire will be sufficient to
pay our expenses, as well as generate a profit for our shareholders. However,
potential investors should note that our company has experienced significant
losses in the past and there can be no assurance that the company will ever
achieve profitability. Any such opportunity will be evaluated for feasibility at
the time based upon such factors as future development potential of the
producing property, the proximity of property to our existing operations, market
prices for oil and gas, current and proposed drilling activities on existing TBX
Resources prospects and our financial position. In addition, in order to finance
future development and exploration activities, we will consider sponsoring
public or private partnerships depending upon the number, size and economic
feasibility of our generated prospects, the level
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of participation of our industry partners and various other factors. However,
potential investors should note that we currently do not have in place any
definite financing opportunities and there can be no assurance that we will be
able to enter into such financing arrangements or that if we are able to enter
into such arrangements, we will be able to achieve any profitability as a result
of our operations.
SEASONAL NATURE OF BUSINESS
Oil and gas prices are subject to seasonal fluctuations that are beyond
our ability to control. Historically, the demand for natural gas decreases
during the summer months and increases during the winter months. Recently, mild
winters have lessened the fluctuation. Pipelines and other entities have begun
to more effectively utilize storage capacity by purchasing some of the winter
load in the summer at reduced prices, further reducing seasonal fluctuations in
gas prices.
BUSINESS RISKS
TBX Resources is subject to all of the risks normally associated with
the exploration for and production of oil and gas, including uncontrollable
flows of oil, gas or well fluids into the atmosphere, pollution, and fires, each
of which could result in damage to or destruction of oil and gas wells,
producing formations, or production facilities or damage to persons and other
property. As is common in the industry, we do not fully insure against all these
risks either because insurance is not available or because we elect not to
insure due to prohibitive premium costs. The occurrence of an event affecting
TBX Resources could have a material adverse effect on the financial position and
results of our operations. Matt Davis supervises our land department and is
responsible for making the applicable filings with the Texas Railroad Commission
and other regulatory agencies having control over our operations.
Our exploration activities carry risks that the value of the related
acreage may be decreased by adverse geological studies, unfavorable drilling
results on nearby acreage, or lease expirations. In addition, drilling carries a
significant risk that no commercial oil or gas production will be obtained and
the investment will not be recovered. We prefer to re-complete or rework
producing properties to minimize this risk. The ultimate cost of drilling,
completing, and operating wells is often uncertain. Moreover, drilling
operations may be curtailed or delayed, with the likelihood of increased costs,
as a result of, among other factors, title problems, wellhead prices, weather
conditions, and geologic uncertainty.
EMPLOYEES AND CONSULTANTS
TBX Resources has three (3) full-time employees. Tim Burroughs, our
president, supervises all of the day-to-day operations of the company. Christine
Coley is the secretary/treasurer and director of administration for our company
and oversees all phases of accounting, purchasing, customer service, scheduling,
compliance and day-to-day office operations. Matt Davis is in charge of our land
department and is also responsible for insuring that all necessary filings are
made with the Texas Railroad Commission and other regulatory agencies having
jurisdiction over our operations.
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Ralph Gillispie serves as a consultant to our company. Dr. Gillispie
has worked with Continental Oil Company in Midland, Texas; Sedco International,
Dallas, Texas; Tropic Drilling, Ltd., in Athens, Greece; Petroleos Brasilero in
Rio De Janeiro, Brazil; Elf Aquitane in Paris, France; Gulf Oil Company in
Houston, Texas; Cothrum Drilling Company in Dallas, Texas; General American
Petroleum in Dallas, Texas and WFT Oil Company in Wichita Falls, Texas spanning
a period from 1962 to the present. Dr. Gillispie is a registered professional
engineer and has been employed at the above-described companies as an engineer,
maritime superintendent, environmental and safety coordinator, shore-based
manager of operations and president. Dr. Gillispie assists us by acting as an
independent consultant for drilling, production and regulatory issues.
All of the operations conducted in the field on behalf of our company
are conducted by Gulftex Operating, Inc. Our president, Tim Burroughs, owns all
of the common stock of Gulftex Operating, Inc. In the past, no compensation was
paid to Gulftex Operating, Inc. or Tim Burroughs for the ownership of Gulftex
Operating, Inc. or for the management activities conducted by Gulftex Operating,
Inc. However, we have now begun to pay Gulftex Operating, Inc., $800.00 per
month for the activities conducted by Gulftex Operating, Inc., in operating our
wells. It should be noted that Gulftex Operating, Inc., is the operator of
record, for Texas Railroad Commission purposes, of our wells; we have designated
Gulftex Operating, Inc., as the operator of record to protect our company from
liability to third persons who may injure themselves on our wells or any other
instances in which we may have liability associated with our wells. Although we
do not anticipate terminating our relationship with Gulftex, if we did terminate
the relationship, or if Gulftex chose to discontinue providing services to us,
through the experience of TBX Resource's management, we are confident that
other, comparable operations supervisors could be found on a basis that is
similar to that currently experienced by us. In particular, because Gulftex
Operating, Inc., is primarily only serving as the operator of record for Texas
Railroad purposes, Gulftex Operating, Inc., does not perform significant
services for us. Because of this, we are confident that we could locate another
company with a license with the Texas Railroad Commission who would be willing
to serve as operator of record for our wells for the $800.00 per month currently
being paid to Gulftex Operating, Inc.
We will also from time to time rely on the services of independent
landmen, geologists and reservoir and drilling engineers and other technical
consultants as needed.
We maintain our corporate offices at 12300 Ford Road, Suite 265,
Dallas, Texas, and pay a monthly rental of $4,379.38 per month. Our lease
originally terminated on April 30, 1996, but in January, 2000, we entered into
an agreement by which our lease was extended until July 31, 2000. We currently
have no plans to move our offices. Although we currently do not have any plans
to terminate our lease, because of the small amount of space required for our
offices, together with the abundance of office space available in the Dallas/Ft.
Worth metroplex, we do not anticipate any problems in obtaining suitable office
space if our lease were terminated.
COMPETITION
Our competitors include major oil companies and numerous independent
oil and gas companies, individuals and drilling and income programs. Many of our
larger competitors possess and employ financial and personnel resources
substantially greater than those available to us. Such companies are able to pay
more for oil and gas properties and to define, evaluate, bid for and purchase a
greater number of properties than our financial or human resources permit. Our
ability to acquire additional properties and to discover reserves in the future
will be dependent upon our ability to evaluate and select suitable properties
and to consummate transactions in a highly competitive environment.
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OIL AND GAS MARKETING
The availability of a ready market for oil and gas produced from
properties now owned or hereafter acquired by us and the prices for such
production are dependent upon numerous factors, many of which are beyond our
control. These factors include, among other things, the level of domestic
production, the availability of imported oil and gas, actions taken by foreign
oil and gas producing nations, the availability of pipelines with adequate
capacity and other transportation facilities, the availability and marketing of
other competitive fuels, fluctuating demand for oil, gas and refined products,
and the extent of government regulation and taxation (under both present and
future legislation) of the production, refining, transportation, pricing, use
and allocation of oil, natural gas, refined products, and substitute fuels. In
view of the many uncertainties affecting the supply and demand for crude oil,
natural gas, and refined petroleum products, we cannot predict the prices or
marketability of our oil and gas production.
Our oil production is sold at or near our wells under short-term
purchase contracts at prevailing prices in accordance with arrangements which
are customary in the oil industry. We currently do not have any gas production,
but when we do, we expect substantially all of our gas production to be sold on
the spot market and not, therefore, subject to long term contracts. Although
this may prevent us from being required to dispose of our production at low
rates, there can be no assurance that purchasers will be willing to continue to
purchase our natural gas on the spot market.
REGULATION
The following discussion of regulation of the oil and gas industry is
necessarily brief, and is not intended to constitute a complete discussion of
the various statutes, rules, regulations or governmental orders to which our
operations may be subject.
The production of oil and gas is subject to extensive federal, state
and city laws, rules, orders and regulations governing a wide variety of
matters, including the drilling and spacing of wells, allowable rates of
production, prevention of waste and pollution and protection of the environment.
In addition to the direct costs borne in complying with such regulations,
operations and revenues may be impacted to the extent that certain regulations
limit oil and gas production to below economic levels. Although the particular
regulations applicable in each state in which operations are conducted vary,
such regulations are generally designed to ensure that oil and gas operations
are carried out in a safe and efficient manner and to ensure that
similarly-situated operators are provided with reasonable opportunities to
produce their respective fair share of available oil and gas reserves. However,
since these regulations generally apply to all oil and gas producers, our
management believes that these regulations should not put us at a material
disadvantage to other oil and gas producers.
While not always the case, sales of crude oil, condensate, and natural
gas liquids by TBX Resources presently can be made at uncontrolled market
prices. While there are currently no federal price controls on crude oil
condensate or natural gas liquids, there can be no assurance that Congress will
not reenact controls at a future time.
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The exploration, development, production and processing of oil and gas
are subject to various federal and state laws and regulations designed to
protect the environment. Compliance with these regulations is part of our
day-to-day operating procedures. Infrequently, accidental discharge of such
materials as oil, natural gas or drilling fluids can and does occur. Such
accidents can require material expenditures to correct. We maintain levels of
insurance customary in the industry to limit our financial exposure. We are
unaware of any material capital expenditures required for environmental control.
The trend in environmental regulation has been to place more
restrictions and limitations on activities that impact the environment, such as
emissions off pollutants, general disposal of wastes, and the use and handling
of chemical substances. Increasingly, strict environmental restrictions and
limitations have resulted in higher operating costs for us and other similar
businesses throughout the United States, and it is possible that the costs of
compliance with environmental laws and regulations will continue to increase.
State initiatives to regulate further the disposal of oil and gas
wastes could have a similar impact on us. In addition, we are subject to laws
and regulations concerning occupational health and safety. It is not anticipated
that TBX Resources will be required in the near future to expend amounts that
are material in relation to our total capital expenditures program by reason of
environmental or occupation health and safety laws and regulations, but insomuch
as such laws and regulations are frequently changed, we are unable to predict
the ultimate cost of compliance with these laws.
We do not believe that our environmental risks are materially different
from those of comparable gas and oil companies operating in similar geographic
areas.
Nevertheless, no assurance can be given that environmental laws will
not, in the future, result in a curtailment of production or material increases
in the cost of production, development or exploration or otherwise adversely
affect our operations and financial condition. Although we maintain liability
insurance coverage against certain liabilities from pollution, such
environmental risks generally are not fully insurable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS IN 1999 VS. 1998
We incurred a net loss of $742,857 for the fiscal year ended November
30, 1999 as compared to a net loss of $861,825 for fiscal year ended November
30, 1998. This decrease in the loss of $118,968 is discussed below.
REVENUES: We generate revenues from producing oil and gas properties
and managing an oil and gas joint venture development program. Our oil sales
decreased $31,284 from $74,279 for the twelve months ended November 30, 1998 to
$42,995 for the twelve months ended November 30, 1999. The decrease is
attributable to the fact that continuing depressed oil prices caused us to
shut-in the majority of our wells in 1998. We undertook this measure to preserve
the commercial viability of our wells and reduce operating costs.
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Joint venture income increased $198,166 in the most recent fiscal year
from $37,714 in fiscal year ended November 30, 1998 to $235,880 in the fiscal
year ended November 30, 1999. In May 1999 we sponsored the formation of a joint
venture for the purpose of conducting oil and gas development and production
activities on approximately 229 acres in Panola County, Texas. We serve as
General Manager for the joint venture and, as such, have full and exclusive
discretion in the management and control of the venture. We have a 1% working
interest and a 9% carried interest until the development work to be conducted by
this joint venture is complete. Thereafter, joint venture expenses are allocated
90% to the joint venture partners and 10% to us. Net revenues from this
venture's oil and gas properties are allocated 95% to the joint venture partners
and 5% to us. The program was undertaken on a fixed cost, or turnkey basis
(meaning that the risk of cost overruns is absorbed by us; likewise, any cost
savings will inure to our benefit). Accordingly, all monies raised are recorded
as joint venture income and all expenses to acquire, rework and operate this
joint venture's wells are charged to joint venture costs and expenses. We expect
to make a profit on the turnkey portion of the venture but there can be no
assurance this profit will be attained. We did not sponsor joint venture
development programs in 1998. The Joint venture income in the amount of $37,714
reflected in our financial statements for 1998 relates to several partners who
entered programs we conducted in 1997 late so that this income was entered on
our books in 1998.
The November 30, 1999 other income of $99,090 is an increase of
approximately $99,000 over the same twelve months in the previous fiscal year.
The increase primarily consists of the settlement of a claim in the amount of
$75,000 against a financial institution. The claim arose as a result of the fact
that the financial institution from whom we received the $75,000 settlement bank
had accepted and wrongfully honored checks forged by a former employee that was
uncovered in 1998. Because the unrecovered losses caused by this employee's
illegal acts represented less than 5% of our revenue for the fiscal year ended
November 30, 1998, the losses sustained as a result of the forgeries were not
material to the results of our operations for the fiscal year ended November 30,
1998.
EXPENSES: Lease operating expenses and taxes for the twelve months
ended November 30, 1999 were $204,531 as compared to $258,049 for the twelve
months ended November 39, 1998. The decrease of $53,518 is attributable to the
decrease in lease operating expenses resulting from the sale of 12 wells and the
shut-in of producing wells for entire fiscal year. We disposed of 12 wells in
June, 1999. Our management was of the opinion that the costs of re-working,
developing and producing these wells would far exceed the potential revenues
from the wells. Also, by keeping these wells, we would have been required to pay
substantial plugging expenses. To avoid a future drain on our working capital
resources, we elected to transfer all of our interest in these wells to a third
party for nominal consideration. The net book value of these wells at the time
of the conveyance was $112,739, which was charged to current earnings.
As discussed above, in May 1999, we sponsored the formation of a joint
venture for the purpose of conducting oil and gas development and production
activities on approximately 229 acres in Panola County, Texas. The increase in
joint venture expenses of $57,840 from the previous fiscal year is the result of
expenses paid or accrued for the joint venture. We did not sponsor joint venture
development programs during the fiscal year ended November 30, 1998.
Selling, general and administrative expenses decreased $247,452 to
$651,723 for the twelve months ended November 30, 1999. The decrease is
attributable to reduction of the costs
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associated with the conversion of previous joint venture partners to
stockholders of the Company, such costs including, legal, engineering and other
professional fees.
We assigned our interest in the Pine Mills Field located in East Texas
in April of 1999 for settlement of a dispute in a civil action. The net book
value of this field of approximately $75,000 was reported as a one-time charge
to current earnings.
Depreciation, depletion and amortization increased $5,161 to $18,989
for the year ended November 30, 1999. Because depreciation, depletion and
amortization on oil and gas wells are calculated on the units of production
method, this increase was primarily a result of wells being brought back on in
late 1999, with the resulting increase in production. On a historical basis, the
charges made to depreciation, depletion and amortization are relatively low for
both 1998 and 1999 since the majority of our wells were shut-in.
INCOME TAX BENEFIT: We recorded an income tax benefit of $197,259 for
the fiscal year ended November 30, 1998. Our cumulative benefit as of November
30, 1999 was $235,742, after giving affect to a valuation reserve of $75,000.
Based on the most recent independent engineering report for our wells,
Management expects to realize sufficient profits from our operations to utilize
the income tax benefits recorded to date. No income tax benefit was recorded for
the fiscal year ended November 30, 1999. As a result of depressed oil prices,
Management elected to not record additional income tax benefits for the current
fiscal year.
RESULTS OF OPERATIONS AS OF FEBRUARY 2000 VS. FEBRUARY 1999
REVENUES: During the three months ended February 29, 2000, we generated
approximately $10,177 in revenue from oil and gas sales as compared to $3,224
for the three months ended February 28, 1999. The $6,953 increase was primarily
due the increase in oil prices. Joint venture income for the three months ended
February 29, 2000 was $130,422 as compared to $0 for the same period last year;
this is because we were not a sponsor of a joint venture partnership during the
three month period ended February 28, 1999.
EXPENSES: Lease operating expenses and taxes decreased $12,671 form
$54,327 for the three months ended February 28, 1999 to $41,706 for the three
months ended February 29, 2000. The decrease is primarily the result of the
shut-in of producing wells and the disposal of 12 wells subsequent to February
28,1999. Joint venture costs and expenses were approximately $84,914 as compared
to $0 for the same period last year; this is because we were not a sponsor of a
joint venture partnership during the three month period ended February 28, 1999.
Selling, general and administrative expenses decreased approximately $138,799
from $272,012 for the three months ended February 28, 1999, to $133,213 for the
three months ended February 29, 2000. The decrease is attributable to reductions
in post-conversion expenses associated with our joint venture partners who
converted their interest for stock in the company and the sale of additional
shares to some of these stockholders. During the three month period ended
February 29, 2000, we provided for a loss of $100,000 on the lapse of our option
(due to expire on March 31, 2000) to purchase additional shares of Southern Oil
& Gas Company, Inc. Depreciation, depletion and amortization decreased $8,516
from $18,516 for the three months ended February 28,1999 to $8,516 for the three
months ended February 29,000. The decrease is due to a change in the estimated
reserves of some of our properties.
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PROVISION FOR INCOME TAXES: We have not provided for tax benefits
associated with our losses for the three months ended February 29, 2000 and
February 28, 1999.
NET LOSS: Our net loss decreased approximately $113,531 from $(341,631)
for the three months ended February 28, 1999 to $(228,100) for the three months
ended February 29, 2000. The decrease in the loss is attributable to higher
revenues and lower expenses for the most recent three-month period over the same
period in the preceding year. However, the reduction in expenses was offset by
the write-down of our investment in Southern Oil & Gas Company.
LIQUIDITY AND CAPITAL RESOURCES: We have funded our operations through
cash generated from the sale of our common stock. Our cash used for operating
activities totaled $60,084 and $304,160 for the three months ended February 29,
2000 and February 28, 1999, respectively. We did not make any capital
investments during the three months ended February 29, 2000. Capital investments
for the three months ended February 28, 1999 were $300,000 of which $100,000 was
written-off in February 2000. Cash provided by the sale of common stock totaled
$115,173 during the three months ended February 29, 2000. Cash provided by the
sale of stock totaled $586,936 for the three months ended February 28, 1999.
CASH FLOWS OF THE COMPANY
The main source of cash flow we anticipate receiving in the succeeding
twelve months will come from production revenues. We are in the process of
bringing more of our wells that have been shut-in on-line and in developing the
Bethany Field. This increased number of wells producing, together with the
increase in oil prices experienced as compared to twelve months ago, should
enable us to absorb well-related costs and general administrative expenses and
hopefully generate a profit for the fiscal year to be ended in 2000.
In the past, we have sponsored joint ventures that have generated
revenue to us from management fees, turn-key contract fees and revenue from
production from wells to be generated by such joint ventures. Although we
currently do not have any specific plans to develop any new joint ventures, if
presented with the appropriate opportunities, we will enter into joint ventures
and hopefully generate revenue for us. However there can be no assurance that we
will be able to locate prospects that are appropriate for our development.
In the past, we have also generated cash from the sale of our common
stock. Although we currently do not have any plans to sell additional amounts of
our common stock, if we were capable of doing so, additional revenues would be
generated. However, because we have no financing arrangements in place nor any
current plans to sell additional stock, an investor should not expect us to
generate significant sums from the sale of common stock.
DESCRIPTION OF PROPERTIES
Our properties are described in detail in the description of properties
section that follows. Generally, we own leasehold rights in six oil and gas
fields located in Gregg, Hopkins, Franklin, Panola and Wood Counties, Texas,
which are located in East Texas. These six fields are referred to as the East
Texas, Mitchell, Talco, Manziel, Quitman and Bethany Fields. Because the
Mitchell Creek and Talco Fields and the Manziel and Quitman Fields are located
in the immediate vicinity of each other, the geologic information we have for
these four fields are combined into the Manziel
-10-
<PAGE> 13
and Quitman Fields and the Mitchell Creek and Talco Fields discussion. We own or
operate an interest in 69 wells, 6 of which are producing, 52 of which are
shut-in, 8 of which are designated as injections wells and 3 are designated as
water supply wells.
PLAN OF OPERATION FOR THE FUTURE
For the fiscal year ended November 30, 1998, we had $112,086.00 in
revenues, of which $74,279.00 was oil and gas sales, $37,714.00 was joint
venture income, and $93.00 was other income. In addition, during the same
period, we had total expenses of $1,171,170.00, comprised of $258.49 in lease
operating and taxes, $899,075.00 in selling, general and administrative
expenses, and $14,046.00 in depreciation, depletion and amortization. Our net
loss for November 30, 1998, totaled $1,059,084.00.
For the fiscal year ended November 30, 1999, we had total revenues of
$377,965.00, comprised of $42,995.00 from oil and gas sales, $235,880.00 in
joint venture income, and $99,090.00 in other income. During this same period,
we had expense of $1,120,822.00, comprised of $204,531.00 in lease operating and
taxes, $57,840.00 in joint venture costs and expenses, $651,723.00 in selling,
general and administrative expenses, $187,739.00 on the loss on the sale of oil
and gas properties and settlement of litigation and $18,989.00 in depreciation,
depletion and amortization. The result for the fiscal year ended November 30,
1999, was a net loss of $742,857.00.
Our current plan of development does not call for any additional
capital infusions. Instead, as presently constituted, we expect to generate
sufficient revenues from the sale of our production to pay all costs associated
with our company for at least the following twelve months. We think that this
sufficient revenue will come from two sources: increased prices for oil
production and increased number of wells bought on-line. Specifically, over the
past twelve months, the price paid for oil production in the area in which our
wells are located has more than doubled. This increase in oil price has made it
to where more of our wells are capable of commercial production such that those
wells that have been shut in may be reopened and production commenced therefrom,
thus additionally increasing our revenues. However, our existing plan is subject
to alterations based on opportunities that may present themselves. Still, to
maintain our status quo, we do not expect to need any additional funds during at
least the next twelve months.
We may purchase new oil and gas properties or additional equipment to
operate same. Any such additional purchases will be done on an "as needed" basis
and will only be done in those instances in which we believe such additional
expenditures will increase our profitability. However, at present, we have no
definite plans to acquire any specific oil and gas properties or additional
equipment and we have no firm commitments by any financial institution to
provide any funds necessary to procure the same. As a result, our ability to
acquire additional properties or equipment is strictly contingent upon our
ability to locate adequate financing to pay for these additional properties or
equipment. There can be no assurance that we will be able to obtain the
opportunity to buy properties or equipment that are suitable for our investment
or that we may be able to obtain financing to pay for the costs of these
additional properties or equipment at terms that are acceptable to us.
Additionally, if economic conditions justify the same, we may hire additional
employees although we do not currently have any definite plans to make
additional hires.
-11-
<PAGE> 14
The oil and gas industry is subject to various trends. In particular,
at times crude oil prices increase in the summer, during the heavy travel
months, and are relatively less expensive in the winter. Of course, the prices
obtained for crude oil are dependent upon numerous other factors, including the
availability of other sources of crude oil, interest rates, and the overall
health of the economy. We are not aware of any specific trends that are unusual
to our company, as compared to the rest of the oil and gas industry.
We do not currently have any material commitments for capital
expenditures of which we are aware. However, if we decide to purchase additional
oil and gas properties, the funds we would need to acquire such properties could
be material. However, we will not acquire properties without obtaining, in
advance, suitable financing to fund the purchase of such properties. In general,
although conditions have improved over the past six months, many financial
institutions are reluctant to loan amounts to oil and gas companies, primarily
based upon the significant downturn with the past twenty four months of the
price of oil. As a general rule, as the price of oil increases, the ability to
obtain financing for projects in the oil and gas industry increases. However,
because of the cycles experienced in the oil and gas industry, there can be no
assurance that the company will be able to obtain financing for projects it
wishes to pursue, regardless of the economic viability we envision for the
project, if institutional funds are not available. We currently do not have any
firm commitments by anyone to loan or otherwise make available to us funds
necessary to conduct our operations.
DESCRIPTION OF PROPERTIES
GENERAL: The following is various information concerning production
from our oil and gas wells, and our productive wells and acreage and undeveloped
acreage. Our oil and gas properties are located within the northern part of the
prolific east Texas salt basin. The earliest exploration in this area dates back
to the early 1920s and 1930s, when frontier oil producers were exploring areas
adjacent to the famous "east Texas field" located near the town of Kilgore,
Texas. We have leasehold rights in three oil and gas fields located in Gregg,
Hopkins, Franklin, Panola, and Wood Counties, Texas.
RESERVES REPORTED TO OTHER AGENCIES. We are not required and do not
file any estimates of total, proved net oil or gas reserves with reports to any
federal authority or agency.
PROPERTIES. The following is a breakdown of our properties:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Name of Field Gross Producing Well Count Net Producing Well Count
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
East Texas Field 0 0
- ----------------------------------------------------------------------------------------------------
Mitchell Creek & Talco Field (1) 2 1.9
- ----------------------------------------------------------------------------------------------------
Manziel & Quitman Field 4 4
- ----------------------------------------------------------------------------------------------------
Bethany Field 0 0
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Although these 2 wells are classified as producing wells, since
they have only recently been brought back to on-line status and are currently
undergoing testing, we do not have sufficient information to record the current
production from these 2 wells.
-12-
<PAGE> 15
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Name of Proved Proved Proved Proved Current Percentage of
Field Reserves: Reserves: Developed Developed Production Reserves in Field
Oil Gas Reserves: Reserves: to Total Reserves
(bbls) (mcf) Oil Gas Held by the
(bbls) (mcf) Company
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
East 13,551 0 13,551 0 0 oil 0.8
Texas gas 0
Field
- ----------------------------------------------------------------------------------------------------------------------
Mitchell 278,555 0 278,555 0 0 oil 17.2
Creek & gas 0
Talco Field
- ----------------------------------------------------------------------------------------------------------------------
Manziel & 233,124 0 233,124 0 320 oil 14.4
Quitman gas 0
Field
- ----------------------------------------------------------------------------------------------------------------------
Bethany 1,096,385 6,912,738 124,650 575,684 0 oil 67.1
Field gas 100
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PRODUCTION. The following tables set forth for the years indicated by
the geographic areas indicated the average sales price, including transfers, per
unit of oil produced and of gas produced and the average production costs per
unit of production.
1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Geographic Area Average Sales Average Average Sales Average
Price Per Unit Production Cost Price Per Unit Production Cost
(barrel) of Oil Per Unit (barrel) (thousand cubic Per Unit
Produced of Oil Produced feet) of Gas (thousand cubic
Produced feet) of Gas
Produced
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East Texas Salt
Basin $18.50 $5.86 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
When the above amounts are computed for all of the properties we maintain, on a
weighted average basis, the average sales price per barrel of oil for the oil
wells operated by us for 1997 equaled $18.50 per barrel of oil. In addition, the
average production costs per equivalent barrel in 1997 was $5.86, again computed
by taking into account weighted averages of the above numbers.
-13-
<PAGE> 16
1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Geographic Area Average Sales Average Average Sales Average
Price Per Unit Production Cost Price Per Unit Production Cost
(barrel) of Oil Per Unit (barrel) (thousand cubic Per Unit
Produced of Oil Produced feet) of Gas (thousand cubic
Produced feet) of Gas
Produced
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East Texas Salt
Basin $11.90 $13.31 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
When the above amounts are computed for all of the properties maintained by the
Company, on a weighted average basis, the average sales price per barrel of oil
for the oil wells operated by TBXR for 1998 equaled $11.90 per barrel of oil. In
addition, the average production costs per equivalent barrel in 1998 was $13.31,
again computed by taking into account weighted averages of the above numbers.
1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Geographic Area Average Sales Average Average Sales Average
Price Per Unit Production Cost Price Per Unit Production Cost
(barrel) of Oil Per Unit (barrel) (thousand cubic Per Unit
Produced of Oil Produced feet) of Gas (thousand cubic
Produced feet) of Gas
Produced
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East Texas Salt
Basin $17.40 $12.09 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
When the above amounts are computed for all of the properties maintained by the
Company, on a weighted average basis, the average sales price per barrel of oil
for the oil wells operated by TBXR for 1999 equaled $17.40 per barrel of oil. In
addition, the average production costs per equivalent barrel in 1999 was $12.09,
again computed by taking into account weighted averages of the above numbers.
Notes:
1. In fiscal year 1997, the interest in properties were owned by several Joint
Ventures which TBX Resources, Inc. managed. All production costs (also referred
to as lease operating expenses or LOE) were paid through the individual Joint
Ventures. TBX Resources, Inc. received a percentage of the net (after LOE)
revenue from each Joint Venture managed in return for TBX's services. All Joint
Ventures were closed in the beginning of fiscal year 1998, partners in the Joint
Ventures were issued restricted stock in TBX Resources and the interests held by
the Joint Ventures were rolled up into TBX Resources, Inc. directly.
2. Average Production Cost per Unit of Oil Produced was calculated by dividing
the total lifting costs (pumper fees, utility costs and material costs) for all
properties by the total barrels of oil produced during the corresponding time
period. Our average production cost per unit increased
-14-
<PAGE> 17
from $5.68 in 1997 to $13.31 in 1998. The primary reason this average production
cost per unit increased was that as oil prices dropped precipitously in 1998, we
significantly curtailed our production, choosing to preserve our prime assets at
a time when we thought the prices we would obtain from our production were at a
historically low level. In general, we only produced a sufficient amount from
most of our wells to allow us to perpetuate our oil and gas leases. Because
several lifting costs, such as electricity and pumper fees, have a minimum
amount that must be charged each month, as we shut-in wells and had fewer
producing wells, our average production cost per unit produced increased. In
addition, our electrical charges were higher than normal in proportion to our
production rates because of our sporadic use of electricity. As seen in the
above tables, our average production cost per unit decreased slightly in 1999,
as compared to 1998. We are hopeful that this decrease in average production
cost per unit will continue, as we bring additional wells on-line, thus
enjoying economies of scale.
PRODUCTIVE WELLS AND ACREAGE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Geographic Total Net Total Net Total Net
Area Gross Oil Productive Gross Gas Productive Gross Developed
Wells Oil Wells Wells Gas Wells Developed Acres
Acres
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
East Texas
Salt Basin 58 57.77719 N/A N/A 3,507.2 3,502.34
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to our ownership in the above described wells, we own 20%
of the common stock of Southern Oil & Gas Company ("Southern"). Southern is an
oil and gas company that owns interests in approximately 435 wells, primarily in
north east Louisiana, which wells produce on average approximately 3,500 barrels
of oil each month. When we originally entered into this agreement with Southern,
we also entered into an operations and management contract (the "Operations
Contract") providing that we were to be paid those profits of Southern that
exceeded $40,000 each month. Because the amounts we have been paid under the
Operations Contract have not been at the levels we anticipated, we have decided
not to increase our ownership interest in Southern.
Notes:
1. Total Gross Oil Wells were calculated by subtracting the 8 wells designated
as Injection Wells and the 3 wells designated as Water Supply Wells from the 69
wells owned and/or operated by TBX Resources, Inc. as of November 30, 1999.
2. Net Productive Oil Wells were calculated by multiplying the working interest
held by TBX Resources, Inc. in each of the 58 Gross Oil Wells and adding the
resulting products.
3. Total Gross Developed Acres is equal to the total surface acres of the
properties in which TBX Resources, Inc. holds an Interest.
4. Net Developed Acres is equal to the Total Gross Developed Acres multiplied by
the percentage of the total working interest held by TBX Resources, Inc. in the
respective properties.
-15-
<PAGE> 18
5. All acreage in which we hold a working interest as of November 30, 1999 had
existing wells located thereon; thus all acreage leased by TBX Resources, Inc.
may be accurately classified as developed.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Geographic Area Gross Acres Net Acres
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
East Texas Salt Basin 3,507.2 3,502.34
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. Undeveloped acreage and developed acreage are in some cases contiguous.
Acreage that has existing wells and may be classified as developed may also have
additional development potential based on the number of producible zones beneath
the surface acreage. For the purpose of this filing, TBX Resources, Inc. is
classifying 2,336 acres (the 2,336 acres are also included within the 3,507.2
developed acres) of the total acreage leased as undeveloped.
2. A more comprehensive study of all properties currently leased by us would be
required to determine precise developmental potential. Currently, only the 2,336
acres which make up the NE Bethany Waterflood Unit #3 and its associated leases
have been studied in enough depth to have determined a developmental program
which will be implemented over the entirety of the acreage.
DELIVERY COMMITMENTS. In October, 1996, TexEast Operating Company,
Inc., a company that is affiliated with our company, entered into a crude oil
purchase agreement with Sun Company, Inc. (R&M). Tim Burroughs, our president,
owns all of the common stock of TexEast Operating Company, Inc. Pursuant to the
Sun agreement, Sun agreed to purchase crude oil and condensate produced from our
properties. The Sun agreement had a term of six months commencing on October 1,
1996, and continuing thereafter month-to-month. Although we are in the
"month-to-month" portion of the crude oil purchase agreement, if Sun chose to
terminate the purchase agreement, we are confident that we would be able to
obtain another purchaser in the vicinity of the wells who would purchase our
crude oil on prices similar to those offered by Sun.
-16-
<PAGE> 19
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
The following table sets forth the stock ownership of the officers,
directors and shareholders holding more than 5% of the common stock of TBX
Resources:
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND AMOUNT PERCENT OF
ADDRESS OF OWNER OWNED CLASS
<S> <C> <C> <C>
Common Stock Tim Burroughs(1) 1,700,000 11.767%
12300 Ford Road
Suite 265
Dallas, Texas 75234
Common Stock Burroughs Family Trust(2) 5,000,000 34.609%
12300 Ford Road
Suite 265
Dallas, Texas 75234
Common Stock Christine Coley 50,000 0.346%
12300 Ford Road
Suite 265
Dallas, Texas 75234
</TABLE>
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Our current executive officers and directors, their ages and present
positions with TBX Resources are identified below. Our directors hold office
until the annual meeting of the shareholders following their election or
appointment and until their successors have been duly elected and qualified. Our
officers are elected by and serve at the pleasure of our Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Tim Burroughs 40 President and Chairman of the Board of Directors
Christine Coley 44 Secretary and Director
</TABLE>
TIM BURROUGHS is the President, Chairman of the Board and founder of
TBX Resources, Inc. Mr. Burroughs has been our President and Chairman of the
Board of Directors since our
- ------------------
(1) Effective December 1, 1999, we entered into an employment agreement
with our President, Mr. Burroughs, whereby Mr. Burroughs shall receive stock
options good for five years from the date of issuance to purchase up to 500,000
of our common stock each year at a price which shall not be greater than 50% of
the average bid price for our common stock during the previous year.
(2) Tim Burroughs, our President and Chairman of the Board of
Directors, controls the Burroughs Family Trust.
-17-
<PAGE> 20
company's inception in 1995. Prior to founding our company, Mr. Burroughs worked
for several Dallas/Ft. Worth area based energy companies. Mr. Burroughs also
studied business administration at Texas Christian University in Ft. Worth,
Texas.
In November, 1997, the Pennsylvania Securities Commission issued a
summary order to our company, Mr. Burroughs and David York, ordering these three
parties to cease and desist from offering and selling any securities within the
Commonwealth of Pennsylvania. In August, 1999, TBX, Mr. Burroughs and Mr. York
entered into an agreement with the Commonwealth of Pennsylvania whereby, without
admitting, or denying the allegations made by the Pennsylvania Securities
Commission, these three persons agreed to refrain from offering or selling
securities in Pennsylvania for a period of 60 days from the date of the order.
In addition, a fine in the amount of $531.00 was paid to the Commonwealth of
Pennsylvania. TBX, Mr. Burroughs and Mr. York have paid the fine described in
the order, refrained from the acts specified in the order, and have complied
with their obligations under the Settlement Agreement.
The basic complaint made by the Pennsylvania Securities Commission was
that our company, Mr. Burroughs and Mr. York had offered to sell securities in
the State of Pennsylvania without registering the same. Although none of the
offered securities were ever actually sold in Pennsylvania, the Pennsylvania
Securities Commission was concerned about the mere offering of securities in
Pennsylvania.
CHRISTINE COLEY is the Secretary-Treasurer; Director of Administration
for TBX Resources. Ms. Coley joined our company in June, 1998. From May, 1996 to
June, 1998, Ms. Coley served as the office manager for Or-Tech Ingredients,
Inc., a manufacturing and packaging company. At Or-Tech Ingredients, Ms. Coley
was responsible for handling most of the financial aspects of the company, as
well as customer service, records management and other general office management
activities. From January, 1994 to June, 1996, Ms. Coley acted as office manager
for CIC, Inc., a telemarketing firm. While at CIC, Inc., Ms. Coley was
responsible for maintaining financial records, as well as serving as the human
resource manager, event coordinator and public relations manager.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by,
or paid to the executive officers named:
<TABLE>
<CAPTION>
Name and Position Year Annual Salary Bonus
<S> <C> <C> <C>
Tim Burroughs 1998 $100,000.00 N/A
President 1999 $100,000.00 N/A
2000 $150,000.00 N/A
Christine Coley 1998 $35,000.00 $2,000.00
Secretary/Treasurer 1999 $38,000.00 N/A
2000 $38,000.00
</TABLE>
-18-
<PAGE> 21
Effective December 1, 1999, we entered into an employment agreement
with our President, Mr. Burroughs, whereby Mr. Burroughs shall receive stock
options good for five years from the date of issuance to purchase up to 500,000
of our common stock each year at a price which shall not be greater than 50% of
the average bid price for our common stock during the previous year.
Ms. Coley was issued 50,000 shares in lieu of cash compensation in
October, 1998. We also have an agreement to issue to Ms. Coley an additional
50,000 shares during the calendar year 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of the operations conducted in the field on behalf of our company
are conducted by Gulftex Operating, Inc. Our president, Tim Burroughs, owns all
of the common stock of Gulftex Operating, Inc. In the past, no compensation was
paid to Gulftex Operating, Inc. or Tim Burroughs for the ownership of Gulftex
Operating, Inc. or for the management activities conducted by Gulftex Operating,
Inc. However, we have now begun to pay Gulftex Operating, Inc., $800.00 per
month for the activities conducted by Gulftex Operating, Inc., in operating our
wells.
SECURITIES BEING REGISTERED
COMMON STOCK
Our Articles of Incorporation, as amended, authorize 100,000,000 shares
of common stock, $0.01 par value per share. The shares of common stock have no
preemptive or other subscription rights, have no conversion rights and are not
subject to redemption. All shares of common stock will be, when and if issued,
fully paid and non-assessable. No personal liability will attach to the
ownership thereof. The holders of common stock are entitled to one vote for each
share held. The common stock has non-cumulative voting rights. In the event of a
liquidation of TBX Resources, the common shareholders would be entitled to their
proportionate part of the assets of TBX Resources, but only after the
satisfaction of all secured and unsecured creditors.
MARKET INFORMATION
At present, prices for our common stock are quoted in the "pink sheets"
maintained by the NASD and our ticker symbol is TBXR. TBX Resources currently
has 5 market makers who assist TBX Resources in maintaining a market for its
stock.
TRANSFER AGENT
The Company's transfer agent is Securities Transfer Corp., 16910 Dallas
Parkway, Suite 100, Dallas, TX 75248, telephone number 972/447-9880.
-19-
<PAGE> 22
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prices for our common stock are currently quoted in the "pink sheets"
maintained by the NASD and our ticker symbol is TBXR. Prices for our stock were
approved for quotation on the pink sheets on December 7, 1999. The following
table shows the high and low bid information for our common stock for each
quarter during which prices for our common stock have been quoted in the pink
sheets.
<TABLE>
<CAPTION>
Quarter Low Bid High Bid
<S> <C> <C>
Quarter ending December 31, 1999 $1.00 $1.75
Period from January 1, 2000 to March 7, 2000 $1.75 $6.00
</TABLE>
The above information was obtained from the NASD. Because these are
over-the-counter market quotations, these quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not represent
actual transactions.
We have approximately 225 shareholders of our common stock as of March
7, 2000.
DIVIDEND POLICY
The holders of common stock are entitled to dividends when, and if,
declared by the Board of Directors from funds legally available therefor,
subject to any preference on preferred stock, if applicable, which may then be
outstanding. We have not paid a dividend on our common stock since inception and
do not anticipate that funds will be utilized for the payment of dividends in
the foreseeable future.
LEGAL PROCEEDINGS
Neither our company nor our property is the subject of any pending
legal proceedings.
RECENT SALES OF UNREGISTERED SECURITIES
We participated in ten joint ventures established for the drilling or
oil and gas wells for the period commencing March 1, 1995 and ending May 28,
1997. In late 1997, we reached an agreement with the other holders of the joint
ventures whereby the joint venture interests in the oil and gas wells developed
by the joint ventures were exchanged for our common stock. The joint venture
interests were exchanged as of October 8, 1997, November 15, 1997, December 1,
1997 and July 13, 1998. All of the exchanges except the N.E. Bethany No. 1 and
No. 2 Joint Ventures were made based on the ratio of one share of common stock
for each dollar invested in a Joint Venture. The ratio used on the N.E. Bethany
I and II Joint Venture was two shares of common stock for each dollar invested
in each particular Joint Venture. By virtue of this exchange, 4,811,232 shares
of our common stock were issued to 150 persons in exchange for the Joint Venture
interests in the applicable wells. The number of shares and prices at which the
shares were sold were as follows:
-20-
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
Share Price $ 0.50 $ 1.00 $ 1.10 $ 1.50
Number of
Shares 188,334 1,028,904 853,348 62,709
</TABLE>
Because the exchange offer was conducted between existing joint venture
partners, we did not use any underwriters or other persons to assist us in the
exchange so no underwriting discounts or commissions were paid. Because we had a
pre-existing business relationship with all of the joint venture owners, and
because no public offering of the securities was conducted, we relied upon
Section 4(2) of the Securities Act of 1933 (the "1933 Act") for an exemption
from the registration requirements.
For the period from January, 1998 through September, 1999, a total of
2,133,295 shares were sold by us to 133 persons who had either previously
participated in joint ventures or were referred to us by participants in our
joint ventures. Most of the persons to whom these shares were sold were our
existing shareholders, by virtue of the conversion of joint venture interest
into common stock, as mentioned above. In addition, some personal acquaintances
of Mr. Burroughs purchased shares of our stock. All of the shares were sold
primarily through the efforts of our President and Chairman of our Board of
Directors, Mr. Burroughs, and were all sold to persons with whom he had a
previously existing business relationship. Mr. Burroughs made no public
announcement or advertising concerning these offering of shares and essentially
sold them only to "friends and family." Because of our pre-existing relationship
with these investors, no underwriter was used and no commissions or underwriting
discounts were paid with respect to these offerings. In October, 1998, Ms.
Coley, our Secretary/Treasurer, was issued 50,000 shares in lieu of cash
compensation. No commissions or underwriting discounts were paid with respect to
these shares and no underwriter was used. Because of Ms. Coley's insider status
with our company, we relied upon Section 4(2) of the 1933 Act for the exemption
from the registration provisions of the 1933 Act. Because of our pre-existing
relationship with these investors, we relied upon Section 4(2) of the 1933 Act
as our exemption from the registration requirements of the 1933 Act.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
On May 21, 1999, we entered into an agreement with our directors
whereby we agreed to indemnify and hold harmless each member of the board of
directors from any and all liability and expenses arising out of the exercise of
their duties under Texas law as a director of our company, absent fraud or gross
misconduct on the part of each director. Our officers or directors could take
-21-
<PAGE> 24
the position that this duty of ours to indemnify our directors or officers may
include the duty to indemnify the officer or director for the violation of
securities laws.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of our company
pursuant to the above described indemnification agreement, our Articles of
Incorporation, Bylaws, Texas law or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or payed by a
director, officer or controlling person of our company and the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
FINANCIAL STATEMENTS
The following are the financial statements of TBX Resources, with
independent auditors report, for the periods ending November 30, 1999 and 1998
as well as the unaudited financial statements of TBX Resources prepared by TBX
Resources for the period ending February 29, 2000.
-22-
<PAGE> 25
TBX RESOURCES, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
February 29, November 30,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 57,797 $ 3,174
Accounts receivable
Trade 3,815 2,967
Affiliates 105,300 79,447
Other 34,320 123,965
Deferred income taxes 56,669 56,669
------------ ------------
Total current assets 257,901 266,222
------------ ------------
EQUIPMENT AND PROPERTY
Office furniture, fixtures and equipment 73,743 71,748
Oil and gas properties, using successful efforts accounting
Proved properties and related equipment 2,363,738 2,363,738
------------ ------------
2,437,481 2,435,486
Less accumulated depreciation, depletion and amortization 91,427 81,427
------------ ------------
Total equipment and property 2,346,054 2,354,059
------------ ------------
INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC 200,000 300,000
------------ ------------
DEFERRED INCOME TAXES 179,073 179,073
------------ ------------
OTHER ASSETS 44,183 45,712
------------ ------------
TOTAL ASSETS $ 3,027,211 $ 3,145,066
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 95,896 $ 91,291
Taxes payable 37,028 54,419
Accrued expenses 34,753 26,895
------------ ------------
Total current liabilities 167,677 172,605
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock- $.01 par value; authorized 100,000,000 shares; 14,559,027
shares outstanding at February 29, 2000 and
November 30, 1999 145,590 145,590
Subscriptions to Capital Stock 860 --
Capital in excess of par value 4,697,289 4,582,976
Accumulated deficit (1,984,205) (1,756,105)
------------ ------------
Total stockholders' equity 2,859,534 2,972,461
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,027,211 $ 3,145,066
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 26
TBX RESOURCES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
------------------------------
Feb. 29, 2000 Feb. 28, 1999
------------- -------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 10,177 $ 3,224
Joint venture income 130,422 --
Other 1,134 --
------------- -------------
Total revenues 141,733 3,224
------------- -------------
EXPENSES:
Lease operating and taxes 41,706 54,327
Joint venture costs and expenses 84,914 --
Selling, general and administrative 133,213 272,012
Loss on option to purchase additional shares of southern 100,000 --
Depreciation, depletion and amortization 10,000 18,516
------------- -------------
Total expenses 369,833 344,855
------------- -------------
NET LOSS BEFORE PROVISION FOR
INCOME TAXES (228,100) (341,631)
Provision for income taxes -- --
------------- -------------
NET LOSS $ (228,100) $ (341,631)
============= =============
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.02) $ (0.02)
============= =============
Weighted average common shares used in per share calculations:
Basic 14,559,027 13,888,527
============= =============
Diluted 15,499,695 --
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 27
TBX RESOURCES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
------------------------------
Feb. 29, 2000 Feb. 28, 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (228,100) $ (341,631)
Adjustments to reconcile net income (loss) to net cash
flow from operating activities:
Depreciation, depletion and amortization 10,000 18,516
Provision for loss on lapse of stock option agreement 100,000 --
Changes in operating assets and liabilities:
Decrease (increase) in:
Trade receivables (848) 1,300
Affiliate receivables (25,853) --
Other receivables 89,645 --
Increase (decrease) in:
Accounts payable (8,075) 46,106
Taxes payable (17,391) (3,662)
Accrued expenses 20,538 (24,789)
------------- -------------
Net cash provided by (used) for operating activities (60,084) (304,160)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in the acquisition of options and stock
of Southern Oil & Gas Company, Inc. -- (300,000)
Cash used in the acquisition of office equipment (1,995) --
------------- -------------
(1,995) (300,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash provided by change in other assets 1,529 --
Cash provided by the issuance of common stock and subscriptions 115,173 586,936
------------- -------------
116,702 586,936
------------- -------------
Net Increase (Decrease) In Cash 54,623 (17,224)
Cash at beginning of period 3,174 145,920
------------- -------------
Cash at end of period $ 57,797 $ 128,696
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 28
TBX RESOURCES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
SUBSCRIPTIONS COMMON STOCK CAPITAL IN ACCUM-
TO ----------------------------- EXCESS OF ULATED
COMMON STOCK SHARES PAR VALUE PAR VALUE DEFICIT
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE NOVEMBER 30, 1999 14,559,027 $ 145,590 $ 4,582,976 $ (1,756,105)
Subscriptions to common stock $ 860 114,313
Net loss for period (228,100)
------------- ------------- ------------- ------------- -------------
BALANCE FEBRUARY 29, 2000 $ 860 14,559,027 $ 145,590 $ 4,697,289 $ (1,984,205)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 29
TBX RESOURCES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
1. BUSINESS ACTIVITIES:
TBX Resources, Inc., a Texas Corporation, was organized on March 24, 1995. The
Company's principal business activity is acquiring and developing oil and gas
properties. The Company has 61 oil and gas wells and 8 injection wells that are
located in East Texas. The Company's philosophy is to acquire properties with
the purpose of reworking existing wells and/or drilling development wells to
make a profit. The Company also sponsors joint venture development partnerships
for the purpose of developing oil and gas properties for profit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation - The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-QSB of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of Management, these financial statements contain all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position, results of operations and cash flows for the
period indicated. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from these estimates. The
Company's quarterly financial data should be read in conjunction with the
financial statements of the Company for the year ended November 30, 1999
(including the notes thereto) set forth in Form 10-SB.
3. SIGNIFICANT TRANSACTIONS:
a. On January 6, 1999 the Company entered into an option agreement, as amended,
to purchase all of Southern Oil & Gas Company's (Southern) stock for one million
dollars ($1,000,000). Under the terms of the agreement TBX paid one hundred
thousand dollars ($100,000) for the option to purchase the shares that runs up
to and including March 31, 2000. The Company currently holds a 20% interest in
Southern. The Company has made a final decision whereby it will not increase its
interest in Southern.
b. The Company has placed restrictions on stockholders wishing to sell their
common stock as follows:
(i) To hold or to sell after an Initial Public Offering only up 20% of the
shares owned during the year 2000 and,
(ii) To continue to hold or to sell up to additional 20% of the original
amount of shares owned during the first quarter of the year 2001.
This agreement expires on March 31, 2001.
c. During the three months ended February 29, 2000, certain shareholders
subscribed to an additional 86,000 shares of the Company's common stock.
5
<PAGE> 30
TBX RESOURCES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
3. SIGNIFICANT TRANSACTIONS (CONTINUED):
d. The Company executed an Employment Agreement effective December 1, 1999 with
Mr. Timothy Burroughs, President and principal stockholder, for three years.
Under the terms of the agreement, Mr. Burroughs shall receive among other items,
an annual compensation of $150,000 and bonuses of up to 10% of his base salary
each time the Company completes a major acquisition, funding or financing. In
addition, Mr. Burroughs shall receive stock options good for five years from the
date of issuance to purchase up to 500,000 shares of the Company's common stock
a year at a price which shall not be greater than 50% of the average bid price
for the shares during the previous year.
6
<PAGE> 31
TBX RESOURCES, INC.
FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998
<PAGE> 32
TBX RESOURCES, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountant's Audit Report Dated December 19, 1999 2
Balance Sheets - November 30, 1999 and 1998 3
Statements of Operations-
For The Twelve Months Ended November 30, 1999 and 1998 4
Statements of Cash Flows-
For The Twelve Months Ended November 30, 1999 and 1998 5
Statements of Changes in Stockholders' Equity-
For The Twelve Months Ended November 30, 1999 and 1998 6
Supplemental Statements of Noncash Investing and Financing Activities-
For The Twelve Months Ended November 30, 1999 and 1998 7
Notes to Financial Statements 8
</TABLE>
1
<PAGE> 33
[JAMES A. MOYERS, CPA LETTERHEAD]
To the Board of Directors and Stockholders
TBX Resources, Inc.
Dallas, Texas
INDEPENDENT ACCOUNTANT'S AUDIT REPORT
I have audited the accompanying balance sheets of TBX Resources, Inc.
as of November 30, 1999 and 1998 and the related statements of operations,
changes in stockholders' equity, cash flows and noncash investing and financing
activities for each of the two years in the period ended November 30, 1999. All
information included in these financial statements is the responsibility of the
management. My responsibility is to express an opinion on these financial
statements based on my audit work.
I have conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of TBX Resources, Inc.
as of November 30, 1999 and 1998, and the results of its operations, cash flows
and noncash investing and financing activities for each of the two years in the
period ended November 30, 1999, in conformity with generally accepted
accounting principles.
December 19, 1999
James A. Moyers, CPA
2
<PAGE> 34
TBX RESOURCES, INC.
BALANCE SHEETS
(Audited)
<TABLE>
<CAPTION>
November 30,
1999 1998
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,174 $ 145,920
Accounts receivable
Trade 2,967 2,969
Affiliates 79,447 117,422
Other 123,965 9,500
Deferred income taxes 56,669 56,669
----------- -----------
Total current assets 266,222 332,480
----------- -----------
EQUIPMENT AND PROPERTY
Office furniture, fixtures and equipment 71,748 71,748
Oil and gas properties, using successful efforts accounting
Proved properties and related equipment 2,363,738 2,566,683
----------- -----------
2,435,486 2,638,431
Less accumulated depreciation, depletion and amortization 81,427 62,438
----------- -----------
Total equipment and property 2,354,059 2,575,993
----------- -----------
INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC. 300,000 --
----------- -----------
DEFERRED INCOME TAXES 179,073 179,073
----------- -----------
OTHER ASSETS 45,712 2,655
----------- -----------
TOTAL ASSETS $ 3,145,066 $ 3,090,201
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 91,291 $ 79,228
Taxes payable 54,419 65,624
Accrued expenses 26,895 24,789
----------- -----------
Total current liabilities 172,605 169,641
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock- $.01 par value; authorized 100,000,000 shares;
14,559,027 shares outstanding at November 30, 1999; 13,699,010
shares outstanding at November 30, 1998. 145,590 136,990
Capital in excess of par value 4,582,976 3,796,818
Accumulated deficit (1,756,105) (1,013,248)
----------- -----------
Total stockholders' equity 2,972,461 2,920,560
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,145,066 $ 3,090,201
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 35
TBX RESOURCES, INC.
STATEMENTS OF OPERATIONS
(Audited)
<TABLE>
<CAPTION>
For the Twelve Months Ended
November 30,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 42,995 $ 74,279
Joint venture income 235,880 37,714
Other 99,090 93
------------ ------------
Total revenues 377,965 112,086
------------ ------------
EXPENSES:
Lease operating and taxes 204,531 258,049
Joint venture costs and expenses 57,840 --
Selling, general and administrative 651,723 899,075
Loss on sale of oil and gas properties and
settlement of litigation 187,739 --
Depreciation, depletion and amortization 18,989 14,046
------------ ------------
Total expenses 1,120,822 1,171,170
------------ ------------
NET LOSS BEFORE PROVISION FOR
INCOME TAXES (742,857) (1,059,084)
Income tax benefit -- 197,259
------------ ------------
NET LOSS $ (742,857) $ (861,825)
============ ============
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.05) $ (0.07)
============ ============
Weighted average common shares used in per share calculations:
Basic 14,234,564 12,567,693
============ ============
Diluted 14,672,564 --
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 36
TBX RESOURCES, INC.
STATEMENTS OF CASH FLOWS
(Audited)
<TABLE>
<CAPTION>
For the Twelve Months Ended
November 30,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (742,857) $ (861,825)
Adjustments to reconcile net income (loss) to net cash
flow from operating activities:
Depreciation, depletion and amortization 18,989 14,046
Provision for deferred income taxes -- (197,259)
Issuance of stock for services 8,025
Loss on sale of oil & gas properties and settlement of litigation 187,739 --
Changes in operating assets and liabilities:
Decrease (increase) in:
Trade receivables 2 29,031
Affiliate receivables 37,975 (117,422)
Other receivables (114,465) 9,626
Increase (decrease) in:
Accounts payable 12,063 24,761
Taxes payable (11,205) 16,164
Accrued expenses 2,106 24,789
Affiliate payables -- (141,578)
----------- -----------
Net cash provided by (used) for operating activities (609,653) (1,191,642)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in the acquisition of options and stock
of Southern Oil & Gas, Inc. (300,000) --
Cash provided by the disposal of oil and gas properties 15,206 --
Cash used in the acquisition and development
of oil and gas properties -- (160,490)
----------- -----------
(284,794) (160,490)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash used for legal and professional services for stock offering (43,057) --
Cash provided by the issuance of common stock 794,758 1,481,701
----------- -----------
751,701 1,481,701
----------- -----------
Net Increase (Decrease) In Cash (142,746) 129,569
Cash at beginning of period 145,920 16,351
----------- -----------
Cash at end of period $ 3,174 $ 145,920
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 37
TBX RESOURCES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Audited)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN ACCUM-
----------------------------- EXCESS OF ULATED
SHARES PAR VALUE PAR VALUE DEFICIT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE DECEMBER 1, 1997 6,700,000 $ 67,000 $ -- $ (151,423)
Issuance of common stock for oil & gas properties 4,811,232 48,112 2,328,970 --
Issuance of common stock for services 802,500 8,025
Issuance of common stock for cash 1,385,278 13,853 1,467,848
Net loss for period (861,825)
----------- ----------- ----------- -----------
BALANCE NOVEMBER 30, 1998 13,699,010 136,990 3,796,818 (1,013,248)
Issuance of common stock for cash 860,017 8,600 786,158
Net loss for period (742,857)
----------- ----------- ----------- -----------
BALANCE NOVEMBER 30, 1999 14,559,027 $ 145,590 $ 4,582,976 $(1,756,105)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 38
TBX RESOURCES, INC.
SUPPLEMENTAL STATEMENT OF NONCASH INVESTING
AND FINANCING ACTIVITIES
(Audited)
<TABLE>
<CAPTION>
For the Twelve Months Ended
November 30,
1999 1998
------------ -------------
<S> <C> <C>
Fair value of oil and gas properties acquired $ - $ (2,377,082)
Issuance of common stock for assets - 2,377,082
------------ -------------
$ - $ -
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 39
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
1. BUSINESS ACTIVITIES:
TBX Resources, Inc., a Texas Corporation, was organized on March 24, 1995. The
Company's principal business activity is acquiring and developing oil and gas
properties. The Company has 61 oil and gas wells and 8 injection wells that are
located in East Texas. The Company's philosophy is to acquire properties with
the purpose of reworking existing wells and/or drilling development wells to
make a profit. The Company also sponsors joint venture development partnerships
for the purpose of developing oil and gas properties for profit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OIL AND GAS REVENUE
Oil and gas revenue is reported when production is sold. The Company accrues
revenue for oil and gas production sold but not paid.
JOINT VENTURE INCOME AND EXPENSES
The Company sponsors joint venture partnerships. Income from the ventures is
recorded as funds are transferred from the partnership to the Company. The
programs are undertaken on a turnkey basis. Accordingly, all monies raised are
recorded as joint venture income and all expenses to acquire, rework and
operate the wells are charged to joint venture costs and expenses. A provision
for loss is reported in the period program cost is estimated to exceed turnkey
revenue.
OFFICE FURNITURE, FIXTURES AND EQUIPMENT
These assets are stated at the Company's cost and depreciated on an accelerated
basis over five to seven years. Maintenance and repair costs are expensed when
incurred, while major improvements are capitalized.
OIL AND GAS PROPERTIES
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests and to drill and equip
development wells are capitalized. Major costs to enhance existing wells are
capitalized. Capitalized costs of producing oil and gas properties, after
considering estimated dismantlement and abandonment costs and estimated salvage
values, are depreciated and depleted by the units of production method. The
computation is based upon recoverable reserves as determined by the Company and
an independent petroleum engineer. Operating costs are expensed as incurred. On
the sale or retirement of a unit of proved property, gain or loss is
recognized.
INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC.
The Company's investment in Southern Oil & Gas Company, Inc. is accounted for
by the cost method. The impact of the cost versus equity method (the preferred
method) of accounting for the investment is not considered material.
8
<PAGE> 40
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES
The Company computes income tax expense using Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS 109 requires the
measurement of deferred tax assets for deductible temporary differences and
operating loss carry forwards and of deferred tax liabilities for taxable
temporary differences. Measurement of current and deferred tax liabilities and
assets is based on provisions of enacted law. The effects of future changes in
tax laws and rates are not anticipated.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
3. AFFILIATED PARTY TRANSACTIONS:
a. The operators of the oil and gas leases, Texeast Operating Co., Inc.
and Gulf Tex Operating, Inc. are affiliates of TBX Resources. Mr.
Burroughs, the majority stockholder of the Company, is the sole
shareholder of Texeast and Gulf Tex.
b. Affiliate receivables represents advances to companies owned by the
President and majority stockholder of the Company. The amounts due as
of November 30, 1999 and 1998 were $79,447 and $117,422,
respectively.
4. ACCOUNTS RECEIVABLE-OTHER:
In November 1999, the Company settled a claim against a financial institution
for $75,000. The claim arose as a result of the bank accepting checks forged by
a former employee over several years. The impact of the loss on the financial
statements for the period ended November 30, 1998 is immaterial.
5. INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC:
The Company's investment in Southern has been accounted for on the cost basis
as follows:
Option to purchase all of the outstanding shares $100,000
Purchase of twenty percent (20%) interest 200,000
--------
Total investment $300,000
========
9
<PAGE> 41
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
5. INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC (CONTINUED):
Summarized financial information from the unaudited financial statements of
Southern as of November 30, 1999 follows:
<TABLE>
<CAPTION>
November
--------
1999
----
<S> <C>
ASSETS
Current assets $ 294,182
Property and equipment net of depreciation, depletion
and amortization of $1,214,555 562,034
----------
Total Assets $ 856,216
LIABILITIES AND EQUITY
Current liabilities $ 47,753
TBX Resources, Inc. purchase option 100,000
Equity 708,463
----------
Total Liabilities and Equity $ 856,216
==========
STATEMENT OF CASH BASIS INCOME AND EXPENSES
FOR NINE MONTHS ENDED NOVEMBER 30, 1999
Revenue $ 299,075
Total expenses (322,552)
Net loss before depreciation and federal income tax benefit $ (23,477)
==========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES:
a. On January 6, 1999 the Company entered into an option agreement, as
amended, to purchase all of Southern Oil & Gas Company's (Southern)
stock for one million dollars ($1,000,000). Under the terms of the
agreement TBX paid one hundred thousand dollars ($100,000) for the
option to purchase the shares that runs up to and including March 31,
2000. The option amount will be applied to the final payment. Each
additional payment of $100,000 will entitle TBX to 10% of the shares
of Southern. After 40% of the Southern shares are acquired by TBX,
the next payment must be for $500,000 for the remaining 60% of the
Southern shares. As of November 30, 1999 TBX Resources, Inc. owned a
twenty percent (20%) interest in Southern. In addition to the
purchase agreement, TBX and Southern entered into a Management
Contract. Under the terms of the agreement, TBX is to provide
operating funds to Southern in the amount of $40,000. If TBX does not
replenish the operating fund to $40,000 after being notified of the
deficiency, the option to purchase Southern is suspended until such
time as the fund is restored. The Company currently does not plan to
increase its interest in Southern.
b. The Company is obligated for $12,322 under operating lease agreements
for rent of its offices and one automobile during the year ending
November 30, 2000. Rent expense for the years ended November 30, 1999
and 1998 was $43,579 and $49,315, respectively.
10
<PAGE> 42
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
7. AFFILIATED OIL AND GAS PARTNERSHIP:
In May 1999 the Company sponsored the formation of the Bethany Field
Joint Venture for the purpose of conducting oil and gas development
and production activities on approximately 229 acres in Panola County,
Texas. The Company serves as General Manager for the joint venture
and, as such, has full and exclusive discretion in the management and
control of the venture. The Company has a 1% working interest and 9%
carried interest until the development work is complete. Thereafter,
joint venture expenses are allocated 90% to the joint venture partners
and 10% to the Company. Net revenues from the venture's oil and gas
properties are allocated 95% to the joint venture partners and 5% to
the Company. Upon completion of the development work, the joint
venture partners have the option to convert their partnership interest
to shares of the Company's common stock. The partners will receive one
share of common stock for each dollar invested in the partnership.
8. STOCKHOLDERS' EQUITY:
a. During 1998, the Company acquired all of the oil and gas properties
of its then joint venture partners in exchange for approximately
4,811,232 shares of TBX Resources' common stock. The transaction was
accounted for as a purchase of property and equipment at the
Company's designated fair value of the assets acquired. The fair
value of the assets of the joint venture partners was determined to
be $2,377,082. The common stock of TBX Resources, Inc. was valued at
the same amount.
b. The bylaws of the Company restrict the transfer of shares of common
stock. Transfers of shares of the Corporation shall be made only (i)
if there is an effective registration covering the shares to be
transferred under the Securities Act of 1933 and applicable state
securities laws, (ii) upon the receipt of a letter from an attorney,
acceptable to the board of directors or its agents, stating that in
the opinion of the attorney the proposed transfer is exempt from
registration under the Securities Act of 1933, or (iii) the transfer
is made pursuant to Rule 144 under the Securities Act of 1933. In
addition, the bylaws reference Subchapter S of the Internal Revenue
Code that does not apply to the Company at this time.
c. The partners of the Bethany Field Joint Venture have the option to
convert their partnership interest for shares of the Company's common
stock. The joint venture partners contributed approximately $438,000
to the partnership. If all the partners converted their partnership
interest, the Company would be obliged to issue approximately 438,000
shares of common stock. The calculation of the Company's November 30,
1999 loss per share, diluted, includes 438,000 shares.
d. The Company executed an Employment Agreement effective December 1,
1999 with Mr. Timothy Burroughs, President and principal stockholder,
for three years. Under the terms of the agreement, Mr. Burroughs
shall receive among other items, an annual compensation of $150,000
and bonuses of up to 10% of his base salary each time the Company
completes a major acquisition, funding or financing. In addition, Mr.
Burroughs shall receive stock options good for five years from the
date of issuance to purchase up to 500,000 shares of the Company's
common stock a year at a price which shall not be greater than 50% of
the average bid price for the shares during the previous year.
11
<PAGE> 43
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
9. SALE OF INTERESTS IN OIL AND GAS PROPERTIES AND SETTLEMENT OF LAWSUIT:
The Company disposed of 12 wells in June of 1999. Management is of the
opinion that the costs of re-working, developing and producing these wells
would far exceed the potential revenues from the wells. Also, the retention
of these wells by the Company would have resulted in substantial expenses
in plugging operations. To avoid future drain on the Company's working
capital resources, Management elected to transfer all of the Company's
interest in these wells to a third party for nominal consideration. The net
book value of the wells at the time of sale was $112,739, which was charged
to current earnings.
The Company assigned its interest in the Pine Mills Field located in East
Texas in April of this year for settlement of a dispute in a civil action.
The net book value of $75,000 was charged to current earnings.
10. INCOME TAXES:
The net deferred tax assets in the accompanying balance sheet includes the
following amounts of deferred tax assets and liabilities:
<TABLE>
<S> <C>
Deferred tax asset $438,356
Valuation allowance (75,000)
--------
Adjusted deferred tax asset 363,356
Deferred tax liability (127,613)
--------
Net deferred tax asset $235,743
========
</TABLE>
The deferred tax assets result from net operating loss carry forwards,
accounts payable and accrued expenses less a valuation reserve. The
deferred tax liability results from deducting depreciation, depletion and
amortization and workover costs prior to recognition in the financial
statements.
The components of the income tax benefit are as follows:
<TABLE>
<S> <C>
Federal
Current $ -0-
Deferred (benefit)
Operating loss carry forward (380,677)
Accounts payable and accruals (57,679)
Workover and other costs 49,802
Depreciation, depletion and
amortization 77,811
Valuation reserve 75,000
----------
Net income tax benefit $ (235,743)
==========
</TABLE>
For the fiscal year ended November 30, 1999, the Company elected not to
increase its deferred tax assets for its net operating loss.
12
<PAGE> 44
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
11. SUPPLEMENTARY OIL AND GAS INFORMATION:
OIL AND GAS RESERVE QUANTITIES
An independent petroleum engineer determined estimated reserves and related
valuations. Estimates of proved reserves are inherently imprecise and are
subject to revisions based on production history, results of additional
exploration and development and other factors.
Proved reserves are reserves judged to be economically producible in future
years from known reservoirs under existing economic and operating conditions.
Proven developed reserves are expected to be recovered through existing wells,
equipment and operating methods.
Following is a summary of the changes in estimated proved developed and
undeveloped oil and gas reserves of the Company, which are located in East
Texas and Northern Louisiana, for the year ended November 30, 1999.
<TABLE>
<CAPTION>
Oil Gas
(BBL) (MCF)
--------- ----------
<S> <C> <C>
Proved reserves December 1, 1998 1,484,854 6,106,547
Revisions to previous estimates (24,481) (749,174)
Production (2,714) -0-
Sales, transfers and retirements (204,226) -0-
--------- ---------
Proved reserves November 30, 1999 1,253,433 5,357,373
========= =========
Proved developed reserves
December 1, 1998 687,668 -0-
November 30, 1999 500,275 446,155
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED CASH FLOWS RELATING TO PROVED OIL AND GAS
RESERVES
Statement of Financial Accounting Standards No. 69 prescribes guidelines for
computing a standardized measure of future net cash flows relating to estimated
proven reserves. The Company has followed these guidelines, which are briefly
discussed in the following paragraph.
Future cash inflows and future production and development costs are determined
by applying year-end prices and costs to the estimated quantities of oil and
gas to be produced. Estimated future income taxes are computed by using
statutory rates including consideration for previously legislated future
statutory depletion rates. The resulting future net cash flows are reduced to
present value amount by applying a 10% annual discount factor.
The assumptions used to compute the standardized measure are those prescribed
by the Financial Accounting Standards Board and, as such, do not necessarily
reflect the Company's expectations of actual revenues to be derived from those
reserves or their present worth. The limitations inherent in the reserve
quantity estimation process, as discussed previously are equally applicable to
the standardized measure computations since these estimates are the basis for
the valuation process.
13
<PAGE> 45
TBX RESOURCES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
11. SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED):
Presented below is the standardized measure of discounted future net cash flows
relating to proved oil reserves as of November 30, 1999.
<TABLE>
<S> <C>
Future cash inflows $41,313,558
Future production costs (11,839,259)
Future development costs (5,152,550)
Future income tax expense (8,269,395)
Future net cash flows 16,052,354
10% annual discount for estimated
timing of cash flows (8,701,981)
-----------
Standardized measure of discounted future
net cash flows relating to proved reserves $ 7,350,373
===========
</TABLE>
The following reconciles the change in the standardized measure of discounted
future net cash flow during the twelve months ended November 30, 1999.
<TABLE>
<S> <C>
December 1, 1998 $3,675,751
Sales of oil and gas produced, net of
production costs 75,616
Net changes in prices and production costs 7,441,420
Net change in future development costs (354,464)
Revisions of previous quantity estimates (1,049,163)
Net change from sales and disposals of
minerals in place (451,077)
Accretion of discount 367,462
Net change in income taxes (2,245,504)
Other (109,668)
----------
November 30, 1999 $7,350,373
==========
</TABLE>
14
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 2, 2000
(Registrant) TBX Resources, Inc.
By (Signature and Title): /s/ Tim Burroughs
----------------------------------------
Tim Burroughs, President
<PAGE> 47
Date Filed: May 2, 2000 SEC File No._______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
REGISTRATION STATEMENT
ON FORM 10-SB
UNDER
THE SECURITIES AND EXCHANGE ACT OF 1934
TBX RESOURCES, INC.
<TABLE>
<S> <C> <C>
(Consecutively numbered pages through of this Registration Statement)
------ -------
</TABLE>
<PAGE> 48
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. SEC REFERENCE TITLE OF DOCUMENT LOCATION
NUMBER
<S> <C> <C> <C>
1 2 CHARTER AND BYLAWS SEC Filing No. 0-29931
2 6 INDEMNITY AGREEMENT SEC Filing No. 0-29931
3 6 CRUDE OIL PURCHASE AGREEMENT SEC Filing No. 0-29931
5 6 III METRO SQUARE OFFICE LEASE AGREEMENT SEC Filing No. 0-29931
6 6 EQUIPMENT AND FURNITURE LEASE SEC Filing No. 0-29931
7 6 EMPLOYMENT AGREEMENT WITH TIM BURROUGHS This Filing
Page ______
8 6 AGREEMENTS WITH SOUTHERN OIL & GAS COMPANY This Filing
Page ______
9 6 AMENDED JOINT VENTURE OF BETHANY JOINT This Filing
VENTURE Page ______
10 6 ENGINEERING REPORT OF HAROLD NEFF & This Filing
ASSOCIATES Page ______
11 10 CONSENT OF JAMES A. MOYERS, CPA This Filing
Page ______
12 10 CONSENT OF HAROLD NEFF & ASSOCIATES This Filing
Page ______
</TABLE>
<PAGE> 1
EXHIBIT 99.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"); effective as of December
1, 1999, by and between TBX Resources, Inc., a Texas corporation (the
"Company"), with offices at 12300 Ford Road, Suite 265, Dallas, Texas 75234 and
Timothy Burroughs, ("Burroughs"), who resides at 9519 Windy Hollow, Valley
Ranch, Texas 75063.
RECITALS
WHEREAS, the Company is engaged in the business of exploring for,
producing, and selling oil and gas (the "Business"), with its principal
Executive office in Dallas, Texas. For purposes of this Agreement, the term
"Company" shall include the Company, its subsidiaries, affiliates, and assignees
and any successors in interest of the Company and its subsidiaries and/or
affiliates;
WHEREAS, the Company desires to employ Burroughs and Burroughs desires
to be employed by the Company, on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment.
1.1 Engagement of Employee. The Company agrees to employ
Burroughs and Burroughs agrees to accept employment as President of the
Company, all in accordance with the terms and conditions of this
Agreement.
1.2 Duties and Powers.
a. During the Employment Period (as defined herein),
Burroughs shall serve as President of the Company,
reporting directly to the Board of Directors of the
Company (the "Board"), and will have such
responsibilities, duties and authorities, and will render
such services of an administrative character, or act in
such other capacity for the Company as the Company's Board
of Directors (the "Board") shall from time to time direct.
Burroughs shall devote his best efforts, energies and
abilities and his full business time, skill and attention
(except for permitted vacation periods and
EMPLOYMENT AGREEMENT - EXHIBIT A
<PAGE> 2
reasonable periods of illness or other incapacity) to
the Business and affairs of the Company.
b. Burroughs acknowledges that his duties
and responsibilities will require his full-time
business efforts and agrees that during he Employment
Period, he will not engage in any other business
activity or have any business pursuits or interests
which interfere or conflict with the performance of
his duties hereunder or which compete with the
Company.
1.3 Employment Period. Burroughs' employment under this
Agreement shall begin on the date hereof and shall continue through and
until the third anniversary of the date hereof (the "Initial Period")
unless extended as provided in this Section 1.3 or terminated as
provided in Section 1.4. The Company may renew this Agreement for
additional one (1) year periods (the "Renewal Periods") on terms that
are mutually acceptable to Burroughs and the Company at least ninety
(90) days prior to the expiration of the Initial Period or any Renewal
Period. The Initial Period and the Renewal Period are collectively
referred to herein as the "Employment Period." Notwithstanding anything
to the contrary contained herein, the Employment Period is subject to
termination pursuant to Section 1.4 and Section 1.5 below.
1.4 Termination. The Company has the right to terminate
Burroughs' employment hereunder, by notice to Burroughs in writing at
any time (i) for "Cause," (ii) without Cause for any or no reason, and
(iii) due to the Disability of Burroughs. Any such termination shall be
effective upon the date of service of such notice pursuant to Section
15. In addition, this Agreement shall terminate automatically upon
Burroughs' death.
"Cause", as used herein, means the occurrence of any of the
following events:
a. the failure of Burroughs to perform his
duties or comply with reasonable directions of the
Board;
b. the determination by the Board in the
exercise of its reasonable judgment that Burroughs
has committed an act or acts constituting (i) a
felony or other crime involving moral turpitude,
dishonesty or theft (ii) dishonesty or breach of duty
with respect to the Company; or (iii) fraud;
<PAGE> 3
c. the determination by the Board in the
exercise of its reasonable judgment that Burroughs
has committed an act that (i) negatively affects the
Company's business or reputation (including its
relationships with its customers, suppliers, or
employees), or (ii) indicates alcohol or drug abuse
by Burroughs that adversely affects his performance
hereunder;
d. a material breach by Burroughs of any of
the terms and conditions of the Agreement; or
e. Burroughs' gross negligence in
performance of his duties hereunder.
Burroughs shall be deemed to have a "Disability" for purposes of this
Agreement if he shall be unable, by reason of illness or physical or mental
incapacity or disability to perform his duties hereunder, with or without
reasonable accommodation by the Company, in substantially the manner and to the
extent required hereunder prior to the commencement of such Disability for a
total period of ninety (90) days in any one hundred eighty (180) day period.
2. Compensation and Benefits
2.1 Base Compensation. During the Employment Period, the
Company will pay Burroughs a base salary at a rate of $150,000 per
annum (the "Base Salary"). The Board shall perform an annual review of
Burroughs' Base Salary based on Burroughs' performance of his duties
and the Company's other compensation policies.
2.2 Bonuses. During the Employment Period, Burroughs shall be
eligible for bonuses of up to 10% of his base salary of $150,000 each
time the Company completes a major acquisition, funding, or financing.
2.3 Options. At the inception of the Employment Period,
Burroughs shall receive stock options good for three years from the
date of issuance to purchase up to 500,000 shares of the Company's
common stock a year at a price which shall not be greater than 50% of
the average bid price for the shares during the previous year.
2.4 Benefits. In addition to the Base Salary, Burroughs will
be entitled to the following benefits during the Employment Period if
offered by the Company, unless otherwise altered by the Board with
respect to all Executives of the Company:
<PAGE> 4
a. hospitalization, disability, life and
health insurance, to the extent offered by the
Company, and in amounts consistent with Company
policy, for all key management employees, as
reasonably determined by the Board;
b. up to two (2) weeks paid vacation each
year with salary, consistent with Company policy for
all senior employees and provided that unused
vacation time shall not be carried over to subsequent
years;
c. reimbursement for reasonable, ordinary
and necessary out-of-pocket expenses incurred by
Burroughs in the performance of his duties, subject
to the Company's policies in effect from time to time
with respect to travel, entertainment and other
expenses, including, without limitation, requirements
with respect to reporting and documentation of such
expenses;
d. a $500 a month car allowance;
e. other benefit arrangements, including a
401(k) or similar tax deferral plan, to the extent
made generally available by the Company to its
Executives and key management employees.
2.5 Compensation After Termination.
a. If the Employment Period is terminated
(i) by the Company for Cause or due to the death or
Disability of Burroughs, (ii) by Burroughs or (iii)
through expiration of the Employment Period, then the
Company shall have no further obligations hereunder
or otherwise with respect to Burroughs' employment
from and after the termination or expiration date
(except payment of Burroughs' Base Salary accrued
through the date of termination or expiration and the
Company shall continue to have all other rights
available hereunder (including, without limitation,
all rights under Section 3 hereof at law or in
equity).
<PAGE> 5
b. If the Employment Period is terminated by
the Company without Cause, Burroughs shall be
entitled to receive the payment of the Base Salary
through the remainder of the Initial Period or, at
the option of the Company, in lieu of such Base
Salary a lump sum payment other payments in a
mutually agreeable amount. The Company shall have no
other obligations hereunder or otherwise with respect
to Burroughs' employment from and after the
termination of his employment or expiration of this
Agreement, and the Company shall continue to have all
rights available hereunder (including, without
limitation, all rights under Sections 3, 4, 5 and 6
hereof, at law or in equity).
2.6 Profit Sharing, Pension and Salary Deferral Benefits. It
is understood by the parties to this Agreement that, during the
Employment Period, Burroughs shall be entitled to participate in or
accrue benefits under any pension, salary deferral or profit sharing
plan now existing or hereafter created for employees of the Company
upon terms and conditions equivalent to those which the Company may
provide for other senior Executive employees. The termination of this
Agreement shall not result in forfeiting vested benefits such as
pension or 401(k) plan benefits that have vested in Burroughs as of the
date of termination.
3. Covenant Not to Compete.
3.1 Burroughs' Acknowledgment. Burroughs agrees and
acknowledges that in order to assure the Company that it will retain
its value as a going concern, it is necessary that Burroughs undertake
not to utilize his knowledge of the Business and his relationships with
customers and suppliers to compete with the Company. Burroughs further
acknowledges that:
a. the Company is and will be engaged in the
Business;
b. Burroughs occupies a position of trust
and confidence with the Company and, during
employment under this Agreement, Burroughs will be
familiar with the Company's trade secrets and with
other proprietary and confidential information
concerning the Company;
<PAGE> 6
c. the agreements and covenants contained in
this Section 3 are essential to protect the Company
and the goodwill of the Business; and
d. Burroughs' employment with the Company
has special, unique and extraordinary value to the
Company and the Company would be irreparably damaged
if Burroughs were to provide services to any person
or entity in violation of the provisions of this
Agreement.
3.2 Competitive Activities. The following terms have the
following meanings for the purposes of this Section 3.2:
"Restricted Period" means the longer of: (i) the period during
which Burroughs is employed by the Company, or (ii) the period of
twelve (12) months from and after the date hereof.
"Territory" means each and every city and county in each state
in which the Company conducted business on or prior to the date hereof
and/or in which the Company conducts business. A complete list of those
counties is attached as Exhibit A.
Burroughs hereby agrees that during the Restricted Period he
will not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or
representative capacity, own, operate, manage, control, engage in,
invest or participate in any manner in, act a consultant or advisor to,
render services for (alone or in association with any person, firm,
corporation or entity), or otherwise assist any person or entity (other
than the Company) that engages in or owns, invests in, operate, manages
or controls any venture or enterprise that directly or indirectly
engages or proposes to engage in the business of (i)exploring for,
producing, or selling oil and gas at the time of termination to be
provided by the Company, anywhere in the Territory. With respect to the
Territory, Burroughs specifically acknowledges that the Company has
conducted the Business throughout those areas comprising the Territory
and that the Company intends to continue to expand the Business
throughout the Territory.
3.3 Solicitation of Employees. Without limited the generality
of the provisions of Section 3.2 above, Burroughs hereby agrees that
during the Restricted Period he will not (except on behalf of the
Company), directly or indirectly, solicit or participate as employee,
agent, consultant, stockholder, director, partner or in any other
individual or representative capacity in any business which solicits,
business from any person, firm, corporation or other
<PAGE> 7
entity which is or was a customer or supplier of the Company during the
term of this Agreement.
4. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one the same Agreement.
5. Descriptive Headings; Interpretation. The descriptive headings in
this Agreement are inserted for convenience of reference only, and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation.
6. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered personally
to the recipient, (ii) sent to the recipient by reputable express courtier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid, or (iii) transmitted by
telecopy to the recipient with a confirmation copy to follow the next day to be
delivered by overnight carrier. Such notices, demands and other communications
shall be sent to these addresses indicated below:
If to Burroughs:
Timothy Burroughs
9519 Windy Hollow
Valley Ranch, Texas 75063
If to the Company:
TBX Resources, Inc.
12300 Ford Road, Suite 265
Dallas, Texas 75234
with a copy to:
Richard M. Hewitt, P.C.
Seven Village Circle
Suite 220
Westlake, Texas 76262
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
COMPANY:
TBX RESOURCES, INC.
By:
-----------------------------------
Timothy Burroughs, Director*
-----------------------------------
Christine Coley, Director*
EMPLOYEE:
By:
-----------------------------------
Timothy Burroughs
*Being all the Directors of the Company.
<PAGE> 1
EXHBIT 99.8
OPTION TO PURCHASE SOUTHERN OIL & GAS COMPANY (1/6/99) AS
AMENDED BY FIRST (2/17/99) AND SECOND (3/26/99) AMENDMENTS:
TBX Resources, Inc., a Texas Corporation, represented by Tim
Burroughs, it's president, (hereafter TBX) and Southern Oil & Gas Company, a
Nevada Corporation, represented by George A. Olsen, Jr., it's president and
majority stockholder, (hereafter SOG) hereby agree:
TBX will purchase SOG for the sum of One Million Dollars
($1,000,000.00) payable as follows:
Payment by TBX to SOG of the sum of One Hundred Thousand Dollars
($100,000.00) will commence an option period effective through March 31, 2000,
during which time TBX may complete the purchase of SOG stock until the remaining
$900,000.00 has been paid.
Each additional payment of not less than $100,000.00 by TBX shall
entitle TBX to 10% of the shares of SOG. Such earned share certificates shall be
issued by SOG within 21 days of receipt of payment from TBX. No partial shares
representing less than 10% of SOG shall be issued by SOG, so all payments by TBX
must be made in $100,000.00 increments or multiples of $100,000.00.
TBX may continue to purchase SOG in $100,000.00 increments until it
has paid $400,000.00 of the $900,000.00 balance due toward the purchase of SOG,
at which time it will own 40% of the stock of SOG. Thereafter, the next payment
must be a payment of $500,000.00 comprising the final payment of the
$900,000.00. The original $100,000.00 paid for the option will not be redeemable
for stock unless and until TBX has paid the $900,000.00. At such time SOG shall
transfer the remaining 60% of the common stock of SOG to TBX. If the sale has
not been completed by April 1, 2000, TBX will retain whatever interest it has
acquired through payments of $ 100,000.00 each during the option period.
During the option period, SOG will be operated and managed pursuant
to the Operations and Management Contract, as amended, between the same parties.
Any breach of this management contract during the term of this option agreement
shall immediately terminate the option period.
At the end of the option period the management contract will
terminate.
This agreement has been rewritten and amended by consent of the
parties to clarify the positions of the parties, adjust the end of the option
period to the fiscal year of SOG, continue the good will and understanding
between the parties and to conclude this sale as soon as possible.
<PAGE> 2
George A. Olsen, Jr.
Majority Shareholder of Southern
Oil & Gas Company
O/S By: O/S
------------------------------ -------------------------------
Christine Coley George A. Olsen, Jr.
<PAGE> 3
AMENDMENT TO OPERATIONS AND MANAGEMENT CONTRACT
BETWEEN TBX RESOURCES, INC. AND SOUTHERN OIL & GAS COMPANY
TBX Resources, Inc., a Texas Corporation (hereafter TBX) represented
herein by Tim Burroughs, it's President, and Southern Oil & Gas Company, a
Nevada Corporation (hereafter SOG) represented herein by George A. Olsen, Jr.,
it's President, hereby amend their agreement dated January 29, 1999, as follows:
The date July 31, 2000, in paragraph 1 is amended to March 31, 2000.
Paragraph 2(c) is amended by changing "within 30 days" to "within 15
days" and by adding the following language:
Should TBX fail to replenish the operating funds to $40,000 within 15
days from the date of notice, the option to purchase SOG will be
suspended until such time as the operating funds are restored at
$40,000 by TBX. Should the exigencies of operations require an
immediate input of funds during the time that TBX has failed to
restore the operating fund, and George A. Olsen, Jr., or a third
party, advances the operating funds, TBX must pay the amount advanced
to George A. Olsen, Jr., or the third party, as well as bringing the
fund up to $40,000 before the option to purchase SOG can be
exercised.
The consideration for this amendment is to clarify the positions of
the parties and the relationship of this agreement to the option to purchase
agreement between the same parties and to continue the operations amicably.
Done this 26th day of March, 1999.
---- -----
WITNESSES: TBX Resources, Inc.
A Texas Corporation
o/s By: o/s
- ------------------------------ -----------------------------
Christine Coley Tim Burroughs
President
Southern Oil & Gas Company
A Nevada Corporation
By: o/s
----------------------------
George A. Olsen, Jr
President
<PAGE> 4
Done this 26th day of March 1999.
WITNESSES: TBX Resources, Inc.
A Texas Corporation
o/s By: o/s
- ------------------------------ ----------------------------
Christine Coley Tim Burroughs
President
Southern Oil & Gas Company
A Nevada Corporation
By: o/s
----------------------------
George A. Olsen, Jr.
President
George A. Olsen, Jr.
Majority Shareholder of
Southern Oil &Gas Company
By: o/s
-----------------------------
George A. Olsen, Jr.
<PAGE> 5
OPERATIONS AND MANAGEMENT CONTRACT
BETWEEN TBX RESOURCES, INC. AND SOUTHERN OIL & GAS COMPANY
TBX Resources, Inc., a Texas corporation, (hereafter TBX) represented herein by
Tim Burroughs, its President, and Southern Oil & Gas Company, a Nevada
corporation, (hereafter SOG), represented herein by George A. Olsen, Jr., its
President, hereby agree as follows:
1. TBX has acquired an option to purchase the stock of SOG and has paid
$100,000.00 for the option until July 31, 2000. The option is a companion
agreement between the parties.
2. During the option period, TBX will assume the profits and losses of SOG as
follows:
a) TBX will pay (US) $40, 000*** to SOG, to coverall costs
of operation and profits from the operations.
b) All profits of SOG above the (US) $40, 000*** amount
will be paid to TBX on a quarterly basis.
c) Should the operating funds fall below $15,000, TBX will
forward an additional amount to SOG to replenish the funds
to (US) $40, 000 * * * within 30 days from the date of
notice.
d) SOG will be operated in a prudent manner to minimize
losses and maximize profits.
e) This management contract will be effective on February
1, 1999.
f) Quarterly statements will be sent to TBX at 12300 Ford
Road, Suite 265, Dallas, TX 75234.
g) SOG current management will continue daily operations
of management and will supply TBX with necessary
information.
<PAGE> 6
3. When TBX pays the amount due SOG for the purchase of SOG this
agreement will terminate.
Done this 29th day of January, 1999.
WITNESSES: TBX Resources, Inc.
A Texas Corporation
o/s By: o/s
- ------------------------------ -----------------------------
Christine Coley Tim Burroughs
President
Southern Oil & Gas Company
A Nevada Corporation
By: o/s
----------------------------
George A. Olsen, Jr.
President
<PAGE> 1
EXHIBIT 99.9
AMENDED AGREEMENT OF JOINT VENTURE
THE JOINT VENTURE INTERESTS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE IN RELIANCE UPON EXEMPTIONS
FROM REGISTRATION AS PROVIDED IN APPLICABLE STATUTES. THE SALE OR OTHER
DISPOSITION OF THE JOINT VENTURE INTERESTS IS RESTRICTED, AS SET FORTH HEREIN,
AND THE EFFECTIVENESS OF ANY SUCH SALE OR OTHER DISPOSITION MAY BE CONDITIONED
UPON RECEIPT BY THE JOINT VENTURE OF AN OPINION OF COUNSEL SATISFACTORY TO THE
JOINT VENTURE AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND OTHER
APPLICABLE STATUTES. IN CONNECTION WITH ACQUIRING THE JOINT VENTURE INTERESTS,
THE JOINT VENTURERS WILL REPRESENT THAT THEY WILL NOT SELL OR OTHERWISE DISPOSE
OF THE JOINT VENTURE INTERESTS WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THE
AFORESAID STATUTES AND THE RULES AND REGULATIONS THEREUNDER.
This Amended Agreement (the "Agreement") is entered into by and between TBX
Resources, Inc. (the "Joint Venture Manager"), and Tim Burroughs (the "Original
Joint Venturer"), and the persons listed on Exhibit "1" hereto and signing
counterparts of this Agreement (such persons being herein referred to
individually as a Joint Venturer: and collectively as the "Joint Venturers").
WITNESSETH:
WHEREAS, by an Agreement of Joint Venture of the Bethany Field Joint Venture
(the "Original Agreement"), dated June 15, 1999, the Joint Venture Manager and
the Original Joint Venturer, as sole Joint Venturer, formed the Bethany Field
Joint Venture (the "Joint Venture") as a joint venture under the Uniform
Partnership Act of the State of Texas; and
WHEREAS, the Joint Venture is presently in existence as a joint venture under
the Uniform Partnership Act of the State of Texas; and
WHEREAS, the Original Joint Venturer desires to withdraw from the Joint Venture
and to have his Joint Venture Interest reallocated to the Joint Venturers; and
WHEREAS, the parties hereto desire to amend, restate and supersede in its
entirety the Original Agreement by and between the Joint Venture Manager and the
Original Joint Venturer, and to enter into this Agreement for the purposes of
(i) admitting the persons listed on Exhibit 1 attached hereto into the Joint
Venture as Joint Venturers, (ii) providing for the withdrawal of the Original
Joint Venturer from the Joint Venture, and (iii) amending, restating and
superseding in its entirety the Original Agreement as hereinafter set forth;
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ARTICLE I
GENERAL
1.1 Continuation. The parties to this Agreement hereby continue the
joint venture (the "Joint Venture") for the sole purposes set forth herein.
Except as expressly provided in this Agreement to the contrary, the rights and
obligations of the Joint Venturers and the administration and termination of the
Joint Venture shall be governed by the provisions of the Texas Uniform
Partnership Act (the "Act"). A Joint Venturer's interest in the Joint Venture
shall be personal property, and all real and personal property owned by the
Joint Venture shall be deemed to be owned by the Joint Venture as an entity, and
no Joint Venturer, individually, shall own any interest in the specific Joint
Venture properties.
1.2 Purpose and Scope of the Joint Venture. The primary investment
objective of the Joint Venture is the acquisition of 90% of the Working
Interest, which is approximately 75% Net Revenue Interest in the Venture
Prospect which consists of two oil wells, one re-entry gas well and one salt
water disposal well located on 228.5 acres of oil and gas leases in Panola
County, Texas.
1.3 Name. The name of the Joint Venture shall be Bethany Field Joint
Venture.
1.4 Term. The term of the Joint Venture shall commence on the date
hereof and shall continue so long as there remains any interest in the Joint
Venture Properties (as that term is hereinafter defined) which has not been
forfeited, sold, disposed of or otherwise abandoned, unless sooner terminated
pursuant to Section 6.1, but in no event shall the term of the Joint Venture
extend past December 31, 2050.
1.5 Place of Business. The principal place of business of the Joint
Venture and the principal mailing address of the Joint Venture shall be 12300
Ford Road, Suite 265, Dallas, Texas 75234, and the Joint Venture Manager may
change the principal place of business and principal mailing address at any time
and from time to time by notice to the Joint Venturers. The Joint Venture may
also have such other places of business within the United States as the Joint
Venture Manager may determine to be appropriate.
1.6 Certain Definitions. When used in this Agreement, the following
terms shall have the meanings as set forth below:
1.6.1 "Accredited Investor" shall mean any investor meeting at
least one of the following conditions:
(1) Any natural person whose individual net worth (or
joint net worth with that person's spouse, if applicable) at
the time of purchase exceeds $1,000,000; or
(2) Any natural person who had an individual income
in excess of $200,000 (or $300,000 with spouse) in each of the
two most recent years and who reasonably expects an income in
excess of $200,000 (or $300,000 with spouse) in the current
year; or
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(3) Any other "Accredited Investor" as that term is
defined in Regulation D as adopted by the SEC.
1.6.2 "Affiliate" shall mean (i) any person directly or
indirectly controlling, controlled by, or under common control with,
another person, (ii) any person owning or controlling ten percent (10%)
or more of the outstanding voting securities of another person, (iii)
any officer, director, partner of a person, and (iv) if such person is
an officer, director or partner of any company for which such person
acts in any such capacity. "Person" means any individual, corporation,
partnership, trust, estate or other entity.
1.6.3 "Code" shall mean and refer to the Internal Revenue Code
of 1986, as amended.
1.6.4 "Equipping Costs" shall mean all the costs associated
with equipping the Venture Well.
1.6.5 "Family Member" shall mean a designated individual's
spouse at the time in question and his descendants by consanguinity or
adoption.
1.6.6 "Family Trust" shall mean a trust in which the primary
beneficiaries are the designated individual or one or more of his
Family Members.
1.6.7 "General and Administrative Costs" shall mean in respect
to any period, all reasonable and customary legal, accounting,
geophysical, geological, land, engineering, travel, rent, telephone and
similar costs necessary or appropriate to the conduct of the business
of the Joint Venture.
1.6.8 "Joint Venturers" shall mean the person, firms,
corporations, and other entities that are admitted to the Joint Venture
either as original, additional or substituted Joint Venturers and that
are then owners of an interest in the Joint Venture. Reference to a
"Joint Venturer" shall mean any one of the Joint Venturers. A Joint
Venturer shall not be deemed to be the owner of any assigned interest
in the Joint Venture unless and until the assignee of such interest in
the Joint Venture has been admitted to the Joint Venture as a
substituted Joint Venturer.
1.6.9 "Joint Venture Manager" shall mean TBX Resources, Inc.,
a Texas corporation, which shall retain a 5% Net Revenue Interest in
the Venture Prospect.
1.6.10 "Joint Venture Percentage" of any Joint Venturer shall
mean that percentage obtained by converting to a percentage the
fraction having as its numerator the number of Interests owned by such
Joint Venturer at the time such percentage is determined and having as
its denominator the total number of Interests owned by Joint Venturers
at such time.
1.6.11 "Joint Venture Properties" shall mean the interests,
properties and rights of any type owned by the Joint Venture.
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1.6.12 "Interest" shall mean an investment in the Joint
Venture equal to $39,500, and shall constitute a 9% Working Interest
and a 7.5% Net Revenue Interest.
1.6.13 "Legal, Accounting and Printing Costs" the costs
associated with the preparation of the Memorandum including legal fees,
accounting fees, printing costs, and miscellaneous costs associated
with the offer of the Interests.
1.6.14 "Leases" shall mean full or partial interest in (1)
Working Interests, (2) oil and/or gas mineral rights, (3) licenses, (4)
concessions, (5) contracts, or (6) other rights authorizing the owner
thereof to drill for, reduce to possession and produce oil and/or gas.
1.6.15 "Memorandum" shall mean the Confidential Private
Placement Memorandum of the Joint Venture dated June 15, 1999.
1.6.16 "Net Revenues" shall mean, in respect to any period,
the portion of Proceeds in excess of the Operating Costs and the
General and Administrative Costs incurred by the Joint Venture during
such period.
1.6.17 "Net Revenue Interest" shall mean an interest in an oil
and gas property which entitles the owner to a specific portion of the
production income from such property.
1.6.18 "Non-Accredited Investors" shall mean persons or
entities who do not satisfy one or more of the alternative definitions
of the term "Accredited Investor" and who, by virtue of their financial
resources and investment acumen or through the use of advisors, satisfy
the Joint Venture Manager or its authorized representatives that such
investors satisfy the suitability standards imposed by Rule 506 of
Regulation D and otherwise meet the financial investment standards set
forth in the Execution Documents.
1.6.19 "Payout" shall mean when the Joint Venturers have
received the return of their Capital Contributions from the sale of oil
and gas produced by the Venture Wells.
1.6.20 "Proceeds" shall mean, in respect to any period, the
aggregate gross cash receipts received by the Joint Venture from all
sources during such period.
1.6.21 "Subscription" shall mean the delivery of an investor
of a completed set of Execution Documents in the form accompanying the
Memorandum and the tender by such investor to the Joint Venture of the
Subscription Payment as required by Section 2.1 hereof.
1.6.22 "Subscription Payment" shall mean the subscription
amount for each Interest ($39,500), upon subscription.
1.6.23 "Subscription Period" shall commence on the date of the
Memorandum and shall expire on November 30, 1999.
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1.6.24 "Syndication Costs" shall mean costs, including sales
commissions and other selected expenses to be incurred by the Joint
Venture in the syndication, distribution and offer of the Interests
pursuant to the Memorandum.
1.6.25 "Venturers" shall mean collectively the Joint Venture
Manager and the Joint Venturers. Reference to a "Venturer" shall mean
any one of the Venturers.
1.6.26 "Venture Prospect" shall mean the 228.5 acres of oil
and gas leases, the two existing oil wells, 1 re-entry gas well, and
the one salt water disposal well.
1.6.27 "Venture Wells" shall mean the two oil wells, one
re-entry gas well and one salt water disposal well located in Panola
County, Texas, and any permitted substitutions or additions thereto.
1.6.28 "Working Interest" shall mean the operating interest
under an oil and gas lease entitling the holder, at his or its expense,
to conduct drilling and production operations on the leased property
and to receive the net revenues from such operations.
1.6.29 "Uniform Act" or "Act" shall mean the Uniform
Partnership Act of the State of Texas.
ARTICLE II
CAPITAL CONTRIBUTIONS
2.1 Capital Contributions of the Joint Venturers.
2.1.1 Upon their Subscription to the Joint Venture and the
acceptance thereof by the Joint Venture Manager, the Joint Venturers
shall each purchase a minimum of one Interest in the amount of $39,500;
provided, however, that the Joint Venture Manager may issue fractional
Interests in exchange for the contribution by a Joint Venturer to the
capital of the Joint Venture of an amount less than $39,500 to the
extent permitted by applicable securities laws. The Joint Venture
Manager shall issue no more than ten (10) Interests to no more than
thirty-five (35) Investors and to an unlimited number of Accredited
Investors as the various jurisdictions where the Interests are offered
and sold shall permit. The Subscription Payments received by the Joint
Venture shall be held in an segregated account at Texas Commerce Bank,
Dallas, Texas, until Subscriptions for ten (10) Interests have been
accepted by the Joint Venture Manager. An initial capital account shall
be established for each Joint Venturer in an amount equal to his
Subscription Payment. Payment for these Interests shall be made by each
Joint Venturer upon execution and tendering of the Subscription
Agreement to the Joint Venture Manager for his consideration, in the
sum of $39,500.
2.1.2 If Subscriptions for ten (10) Interests are accepted by
the Joint Venture Manager on or before the expiration of the Offering
Period, the Joint Venture Manager shall contribute cash to the Joint
Venture in an amount equal to $3,950. The Joint Venture Manager will
also contribute cash monthly to the Joint Venture in an amount
sufficient to pay all Joint Venture costs and expenses charged to the
Joint Venture Manager with respect to the Joint Venture Manager's 10%
interest in the Joint Venture, to the extent such costs and expenses
exceed his share of undistributed
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revenues or proceeds of advances to the Joint Venture, and an amount equal to
his share of any assessments made pursuant to Section 4.9 hereof. The Joint
Venture Manager may also make capital contributions to the Joint Venture by
purchasing Interests and by paying assessments of defaulting Joint Venturers.
The Joint Venture Manager will retain a 9% Carried Working Interest through the
tanks and will pay only its pro rata portion of well operating costs.
2.2 Adjusted Capital Account. A capital account shall be established
and maintained for each Venturer in accordance with Treasury Regulations
promulgated under Section 704(b) of the Code. Such capital account shall be
credited with:
(a) The Venturer's contributions to the capital of the Joint
Venture;
(b) The Venturer's share of income and gains (including exempt
income), and revaluation gain in winding-up;
and shall be debited with:
(c) The distributions made to such Venturer; and
(d) The Venturer's share of losses (including nondeductible
expenditures not chargeable to capital account), and revaluation loss
in winding-up.
In addition, each Venturer's capital account shall be credited or
debited in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv), or any
successor provision, to the extent necessary for the allocation of Joint Venture
items of income, gain, loss, deduction and credit to be respected under Section
704 of the Code.
2.3 Interest. Contributions to the capital of the Joint Venture will
not bear interest.
2.4 No Priorities of Joint Venturers. No Joint Venturer shall have the
right to withdraw or reduce his contribution to the capital of the Joint Venture
except as the result of the dissolution of the Joint Venture or as otherwise
provided by and in accordance with the Act, and no Joint Venturer shall have the
right to demand or receive property other than cash in return for his
contributions to the Joint Venture or have priority over any other Joint
Venturer, either as to the return of contributions of capital to the Joint
Venture or as to profits, losses or distributions.
2.5 Additional Joint Venturers. The Joint Venture Manager may solicit
Subscription Payments for $395,000 from a maximum of thirty-five (35)
Non-Accredited Investors or from an unlimited number of Accredited Investors as
permitted in jurisdictions where the Interests will be sold. The Joint Venture
Manager may admit as Joint Venturers to the Joint Venture the persons, firms,
corporation and other entities whose contributions it accepts. The name,
residence address, and amount of such contribution of each person, firm,
corporation or other entity admitted as Joint Venturers shall be set forth on
Exhibit "1" attached hereto. Each additional Joint Venturer shall make such
representations and warranties as may be required by the Joint Venture Manager.
2.6 Subscription Period. The Joint Venture Manager shall approve or
disapprove Subscriptions of Joint Venturers within thirty (30) days of receipt
and shall return immediately any unaccepted Subscriptions. The Subscription
Period for the Joint Venture shall terminate on November 30,
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1999. In the event Subscriptions totaling $395,000 (10 Interests) are not
received on or before the termination of the Subscription Period, the Joint
Venture Manager has the right, but not the obligation, to purchase any
outstanding Interests as a Joint Venture in the Joint Venture in order to
facilitate Joint Venture business, to extend the subscription period, or to
refund the full amount paid by each subscriber without interest.
ARTICLE III
COMPENSATION AND ALLOCATION OF
INCOME, EXPENSE, PROFIT AND LOSS
3.1 Compensation to Joint Venture Manager. As compensation for its
services to the Joint Venture and reimbursement for expenses on behalf of the
Joint Venture, the Joint Venture Manager is hereby authorized to receive an
Interest in the Net Revenues, income, expenses, gains, losses, deductions and
credits of the Joint Venture as described fully in Article III hereof.
3.2 Participation in Costs. Except as otherwise provided in Section
4.9, the costs and expenses of the Joint Venture will be allocated to the
parties as follows:
3.2.1 Leasehold and Well Purchase Costs. The Geological,
Seismic and Geophysical Costs shall be charged 99% to the Joint
Venturers and 1% to the Joint Venture Manager.
3.2.2 Rework and Equipping Costs. The Turnkey Rework and
Equipping Costs shall be charged 99% to the Joint Venturers and 1% to
the Joint Venture Manager.
3.2.3 Special Costs. The Syndication Costs, Organizational
Costs, Legal, Accounting and Printing Costs, and Management Fee shall
be charged 99% to the Joint Venturers and 1% to the Joint Venture
Manager.
3.2.4 Other Costs. All other Joint Venture costs and expenses
shall be charged 99% to the Joint Venturers and 1% to the Joint Venture
Manager.
3.3 Participation in Revenues. Except as otherwise provided herein,
Joint Venture revenues and Cash Flow shall be credited 99% to the Joint
Venturers and 1% to the Joint Venture Manager.
3.4 Tax Allocations. To the extent permitted by the Code, all
deductions and credits for federal income tax purposes, including, but not
limited to, intangible drilling and development costs, cost recovery deductions,
rental expenses, and investments qualifying for the investment tax credit where
applicable, shall be allocated to the party who has been charged with the
expenditure giving rise to such deductions and credits; and to the extent
permitted by law, such parties shall be entitled to such deductions and credits
in computing taxable income or tax liabilities to the exclusion of any other
party. It is agreed that the tax basis of each oil and gas property for
computation of cost depletion and gain or loss on disposition or abandonment
shall be allocated and reallocated when necessary based upon the capital
interest in the Joint Venture as to such property and the capital interest in
the Joint Venture for such purpose as to each property shall be considered to be
owned by the parties hereto in the ratio in which the expenditure giving rise to
the tax basis of such property has been charged as of the end of such year.
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Except as otherwise provided herein, each item of Joint Venture income
and gain shall be allocated in the same manner as Joint Venture Revenues are
allocated to the parties pursuant to Section 3.3 hereof. Gain on disposition of
Leases shall be separately determined by each party based upon his share of
proceeds allocated hereunder; gain on disposition of other assets shall be
allocated among the parties hereto in the ratio in which each party's share of
proceeds of sale exceeds such party's share of expenditures giving rise to the
adjusted tax basis of the disposed property; provided, further, that within the
limits of the above allocations, gain treated as ordinary income by reason of
recapture of deductions shall be allocated to the parties who received the
benefit of such deductions.
3.5 Sharing Among Joint Venturers. Except as otherwise specifically
provided in this Agreement, revenues, costs and expenses allocated to the Joint
Venturers and paid from Subscription Payments shall be shared by each Joint
Venturer in accordance with his respective Joint Venturer Percentage. Costs and
expenses charged and credited to the Joint Venturers and paid from assessment
proceeds shall be allocated among the Joint Venturers in the ratio in which
their respective assessments bear to the total paid assessments of the Joint
Venturers. Subject to the adjustments of Section 4.9 hereof for failure to pay
any assessment, Joint Venture Net Revenues allocable to the Joint Venturers
shall be allocated among them in the ratio of their Subscription Payments and
paid assessments.
3.6 Allocation of Joint Venture Items with Respect to Interests
Transferred. If any interest in the Joint Venture is transferred, or is
increased or decreased by reason of the admission of a new Venturer or
otherwise, during any taxable year of the Joint Venture, each item of income,
gain, loss, deduction or credit of the Joint Venture for such taxable year shall
be assigned pro rata to each day in the particular period of such taxable year
to which such item is attributable (i.e., the day on or during which it is
accrued or otherwise incurred) and the amount of each such item so assigned to
any such day shall be allocated to the Venturer based upon his respective
interest in such items at the close of such day. For the purpose of accounting
convenience and simplicity, the Joint Venture shall treat a transfer of, or an
increase or decrease in, an interest in the Joint Venture which occurs at any
time during a month (commencing with the month including the date hereof) as
having been consummated on the first day of such month, regardless of when
during such month such transfer, increase or decrease actually occurs.
Distributions of Joint Venture assets in respect to an interest in the Joint
Venture shall be made only to the persons who, according to the books and
records of the Joint Venture, are the owners of the interests in respect of
which such distributions are made on the actual date of distribution. The Joint
Venture Manager shall incur no liability for making distributions in accordance
with the provisions of the preceding sentence, whether or not the Joint Venture
Manager has knowledge or notice of any transfer or purported transfer of
ownership of any interest in the Joint Venture. Without limitation of the
foregoing, gain or loss of the Joint Venture realized in connection with a sale
or other disposition of all or substantially all of the Joint Venture's assets
and/or a termination of the Joint Venture shall be allocated only to persons who
own interests in the Joint Venture as of the date such transaction occurs.
3.7 Distributions. The Joint Venture Manager shall review on a periodic
basis and, at least quarterly, determine whether a cash distribution to the
Venturers should be made, taking into consideration the future cash requirements
of the Joint Venture. At such time that cash distributions are made, such
distributions shall be made to the Joint Venture Manager and the Joint Venturers
in the same proportion as set forth for the allocation of revenues in Section
3.3 hereof.
3.8 Qualified Income Offset. Notwithstanding any other provision of
this Agreement:
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(1) No allocation of any item of loss or deduction or other
item shall be made to a Joint Venturer to the extent such allocation
causes or increases a deficit balance in such Joint Venturer's capital
account, as kept for purposes of Code Sec. 704(b), as of the end of the
Joint Venture taxable year to which such allocation relates. In
determining the extent to which the previous sentence is satisfied,
such Joint Venturer's capital account also shall be reduced for:
(a) Adjustments that, as of the end of such year,
reasonably are expected to be made to such Joint Venturer's
capital account under Treasury Regulation Section
1.704-1(b)(2)(iv)(k) for depletion allowances with respect to
any oil and gas properties of the Joint Venture; and
(b) Allocations of loss and deduction that, as of the
end of such year, reasonably are expected to be made to such
Joint Venturer pursuant to Code Section 704(e)(2), Code
Section 706(d), and paragraph (b)(2)(ii) of Treasury
Regulation Section 1.751-1, and
(c) Distributions that, as of the end of such year,
reasonably are expected to be made to such Joint Venturer to
the extent they exceed offsetting increases to such Joint
Venturer's capital account that reasonably are expected to
occur during (or prior to) the Joint Venture taxable years in
which such distributions reasonably are expected to be made.
For purposes of determining the amount of such expected
distributions and expected capital account increases, the
adjusted tax basis of Joint Venture property (or, if Joint
Venture property is properly reflected on the books of the
Joint Venture at a book value that differs from its adjusted
tax basis, the book value of such property) will be presumed
to be the fair market value of such property, and adjustments
to the adjusted tax basis (or book value) of such property
will be presumed to be matched by corresponding changes in
such property's fair market value.
(2) A Joint Venturer who unexpectedly receives an adjustment,
allocation, or distribution described in (a), (b) or (c) immediately
above, shall be allocated items of income and gain (consisting of a pro
rata portion of each item of Joint Venture income, including gross
income, and gain for such year) in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible.
(3) If a Joint Venturer receives an allocation of income or
gain described in (2) immediately above, then, for each subsequent
taxable year and subject to the limitation of (1) immediately above and
such other limitations as are imposed by this agreement, all items of
income, gain, loss and deduction shall be allocated in an amount and
manner sufficient to offset such allocation of income or gain as
quickly as possible.
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ARTICLE IV
MANAGEMENT
4.1 Management of the Joint Venture. The Joint Venture Manager shall
have full, exclusive and complete charge of all affairs of the Joint Venture and
of the management and control of the Joint Venture, subject only to the
limitations set forth in Section 4.4 hereof. The Joint Venture Manager shall
have all the rights and powers which may be possessed by a partner pursuant to
the Act, and such rights and powers as are otherwise conferred by law or are
necessary, advisable and convenient as to the management of the business and
affairs of the Joint Venture. TBX Resources, Inc. (or it's designee) is hereby
designated by the Venturers to be the "Tax Matters Partner" for federal income
tax purposes.
4.2 Expenses of Joint Venture Manager. The Joint Venture Manager may
charge the Joint Venture for his allocable share of post-offering General and
Administrative Costs directly or indirectly incurred as a result of the Joint
Venture.
4.3 Independent Activities. The Joint Venture Manager shall devote such
time and energy to the business of the Joint Venture as is necessary for the
efficient conduct thereof. The Joint Venture Manager, and any of its affiliates
or associates, may, notwithstanding the existence of this Agreement, engage in
whatever other activities each chooses, whether the same be competitive with the
Joint Venture or otherwise, without having or incurring any obligation to offer
any interest in such activities to the Joint Venture or any party hereto.
Neither this Agreement nor any activity undertaken pursuant hereto shall prevent
the Joint Venture Manager or any of his associates from engaging in such
activities, or require the Joint Venture Manager to permit the Joint Venture or
any Joint Venturer to participate in any such activities, and as a material part
of the consideration for the Joint Venture Manager's execution hereof, each
Joint Venture Manager's execution hereof, each Joint Venturer hereby waives,
relinquishes and renounces any such right or claim of participation.
4.4 Certain Limitations. Notwithstanding anything to the contrary
contained elsewhere herein, the Joint Venture Manager shall not do any of the
following:
4.4.1 Do any act in contravention of this Agreement;
4.4.2 Do any act which would make it impossible to carry on
the ordinary business of the Joint Venture;
4.4.3 Confess a judgment against the Joint Venture;
4.4.4 Sell, transfer, assign pledge or subject to mortgage or
security interest any Joint Venture Property for other than a Joint
Venture purpose;
4.4.5 Admit a person as a Joint Venture Manager except as
otherwise provided in this Agreement;
4.4.6 Admit a person as a Joint Venturer except as otherwise
provided in this Agreement;
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4.4.7 Sell all or substantially all of the Joint Venture
Properties unless Joint Venturers having an aggregate Joint Venture
Percentage of at least a simple majority have approved such action.
4.5 Role of Joint Venturer. No Joint Venturer (other than a Joint
Venturer who is also a Joint Venture Manager) shall take any part in, or
interfere in any manner with, the conduct or control of the business of the
Joint Venture or have any right or authority to act for or by the Joint Venture.
4.6 Administrator. TBX Resources, Inc., or its designee, is hereby
designated as Administrator of the Joint Venture.
4.7 Exculpation and Indemnification. Except in case of gross negligence
or willful misconduct, the doing of any act or the failure to do any act by the
Joint Venture Manager, the effect of which may cause or result in loss or damage
to the Joint Venture, shall not subject the Joint Venture Manager or any of its
affiliates, associates or employees to any liability to the Joint Venturers or
the Joint Venture. Furthermore, the Joint Venture shall indemnify the Joint
Venture Manager and its affiliates, associates and employees thereof against
expenses, including attorneys' fees, judgments and amounts paid in settlement
actually and reasonably incurred by them in connection with such action, suit or
proceeding if the Joint Venture Manager or any of its affiliates, associates or
employees acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interest of the Joint Venture.
4.8 Contract with Affiliates. The Joint Venture Manager may enter into
agreements with other companies owned, controlled or affiliated with the Joint
Venture Manager on competitive terms with other companies doing similar work in
the area.
4.9 Assessments. After all Capital Contributions have been expended,
the Joint Venture Manager may request payment by the Joint Venturers of
Assessments, which shall be paid by the Joint Venturers in their proportionate
shares (i.e., 99% of the Joint Venturers and 1% by the Joint Venture Manager).
Assessments may be requested by the Joint Venture Manager. Payment of any
Assessments will be due within ten days of the mailing of written request
therefor.
4.10 Default.
4.10.1 If any Joint Venturer (a "Defaulting Joint Venturer")
shall fail to make a payment of his Capital Contribution within seven
days of the date due, or an Assessment within ten days after such
payment is due, he shall be in default, and thereupon the Joint Venture
Manager, after seven days written notice of his intent to do so, shall
have the right to set-off any Joint Venture distributions due to the
Defaulting Joint Venturer against amounts due from such Defaulting
Joint Venturer to the Joint Venture, plus expenses incurred in
connection therewith, and, at the sole discretion of the Joint Venture
Manager, do any one or more of the following:
4.10.1.1 in case of nonpayment of an Assessment,
accumulate all of said Defaulting Joint Venturer's share of
Cash Flow, which shall be charged against a separate account
for the set purpose of accounting for
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the amount not paid by such Joint Venturer. Said account shall
be credited with the Defaulting Joint Venturer's share of Cash
Flow. When the total amount credited under this Section equals
five hundred percent (500%) of the total amount not paid by
the Defaulting Joint Venturer, no further amount shall be
charged or credited to said special account, and all income
and expenses thereafter arising from the Joint Venture
operations attributable to the interest of the Defaulting
Joint Venturer shall be charged or credited to his account;
4.10.1.2 in the case of failure to make a Capital
Contribution or an Assessment, secure another person or
persons (who may already be a Joint Venturer(s) or the Joint
Venture Manager) to pay the defaulted installment or
assessment not paid by the Defaulting Joint Venturer,
whereupon such other person(s) shall be admitted as a Joint
Venturer(s) (if necessary). Upon such admission, the
Defaulting Joint Venturer shall have no further rights as a
Joint Venturer. The expenses of admitting such other person(s)
as a Joint Venturer(s) shall be paid by the Defaulting Joint
Venturer;
4.10.1.3 in the case of failure to make a Capital
Contribution or an Assessment, require the Defaulting Joint
Venturer to sell his Interest(s) for $100 to the Joint Venture
Manager or its designee, and the purchaser shall be admitted
to the Joint Venture as a Joint Venturer in accordance with
Section 5.3, succeeding to the rights and obligations of the
Defaulting Joint Venturer; or
4.10.1.4 exercise any other remedies available to the
Joint Venture at law, in equity or otherwise.
4.11 Appointment of Joint Venture Manager as Attorney-in-Fact.
Each Joint Venturer hereby irrevocably appoints the Joint Venture
Manager (but only so long as the Joint Venture Manager is acting as
Joint Venture Manager) his attorney-in-fact to execute all documents
necessary to accomplish the foregoing, which appointment shall be
coupled with an interest.
4.12 Remedies. Each of the Joint Venturers agrees to the
remedies provided in this Section 4.10 in recognition of the
substantial and speculative nature of the damages which his default
could cause to the other Venturers and to the Joint Venture, and with
the further recognition that the necessity of an accounting or
dissolution of the Joint Venture upon such event of default by a Joint
Venturer would be detrimental to the Joint Venture and impractical to
carry out. The parties have agreed that the Joint Venture's actual
damages, in the event of a default of a Joint Venturer, would be
extremely difficult or impractical to determine, and the parties
therefore agree that the remedies provided herein are reasonable.
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ARTICLE V
ASSIGNMENTS, ADMISSIONS, SUBSTITUTIONS,
RESIGNATIONS AND REMOVALS
5.1 Transfers by Joint Venture Manager. Upon written notice to the
Joint Venturers, the Joint Venture Manager shall have the right to sell, assign,
transfer, give or in any other way dispose of, his interest as Joint Venture
Manager of the Joint Venture. The Joint Venture Manager may, without notice to
the Joint Venturers, pledge, encumber, or give as collateral its interest as a
Joint Venturer Manager of the Joint Venture. Upon written notice of the Joint
Venturers, the Joint Venture Manager shall also have the right to convert its
interest in the Joint Venture to an equal undivided interest in any oil and gas
leases owned by the Joint Venture provided there is no change in the Joint
Venture Manager's compensation or the allocation of income, expense, profit or
loss as set forth in Article III herein.
5.2 Transfer by Joint Venturers. No voluntary assignments, transfers or
hypothecation of the Interests purchased herein will be permitted for a period
of one (1) year after the date of purchase, and none will be permitted
thereafter unless said assignment, transfer or hypothecation in the opinion of
counsel satisfactory to the Joint Venture Manager and its counsel, complies with
all applicable securities laws. No assignee of all or any part of his Interests
shall become a substituted Joint Venturer unless the Joint Venture Manager shall
consent thereto, in writing, and in the event that the Joint Venture Manager
grants such consent, it shall be effective only on the following additional
conditions:
5.2.1 The assignee shall consent in writing, in form prepared
by or satisfactory to the Joint Venture Manager, to be bound by the
terms and conditions of this Agreement in the place and stead of the
assigning Joint Venturer;
5.2.2 The assignee shall pay any expenses of the Joint Venture
in effecting the substitution;
5.2.3 All requirements of the Act, including an amendment to
this Agreement, shall have been completed by the assignee and the Joint
Venture; and
5.2.4 The assignment is effected in compliance with all
applicable state and federal securities laws as evidenced by an opinion
of counsel satisfactory to the Joint Venture Manager.
The Joint Venture Manager, at its election, may condition or withhold
such consent for any reason, including but not limited to requiring that the
Joint Venture Manager and/or the remaining Joint Venturers shall have the right
of first refusal to acquire such Interests to be transferred upon terms and
conditions equal to the best bona fide offer the transferring Venturer may have
received for the purchase of such Interests.
5.3 Death of a Joint Venturer. Upon the death of a Joint Venturer, the
personal representative of such Venturer shall have all the rights of the Joint
Venture hereunder for the purpose of managing and settling the estate of the
Joint Venturer. Thereafter, the person or persons succeeding to the Interests of
the deceased Joint Venturer by bequest, inheritance or otherwise, shall be
substituted in the place of such Joint Venturer to the extent of the Interests
so received by such person; however, if the successors are more than
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one (1) in number, one of them must act as agent for the others, which agent
shall be appointed within ninety (90) days of the death of the deceased Joint
Venturer. The death of a Joint Venturer shall not terminate the Joint Venture.
5.4 Substituted Joint Venturer. If any person who is not already a
Joint Venturer acquires all or part of the Interest of a Joint Venturer after
compliance with all of the terms of this Article V, such person shall have the
right to become a substituted Joint Venturer within the meaning of the Act if:
5.4.1 Such person elects to become a substituted Joint
Venturer by delivery of a written notice of such election to the Joint
Venture Manager;
5.4.2 The Joint Venture Manager consents thereto in writing;
and
5.4.3 Such person executes and acknowledges such other
instruments as the Joint Venture Manager may deem necessary or
advisable to effect the admission of such person as a substituted Joint
Venturer, including, without limitation, the written acceptance and
adoption of such person of the provisions of this Agreement.
Upon satisfaction of the foregoing requirements, this Agreement shall
be amended in accordance with the provisions of the Act, and all other steps
shall be taken which, in the opinion of the Joint Venture Manager, are
reasonably necessary to admit such person under the Act as a substituted Joint
Venturer, and such person shall thereupon become a substituted Joint Venturer
within the meaning of the Act.
5.5 Joint Venture Manager as a Joint Venturer. If the Joint Venture
Manager acquires an interest as a Joint Venturer in the Joint Venture, and if
with respect to such interest the Joint Venture Manager becomes a substituted
Joint Venturer within the meaning of the Act and this Agreement, the Joint
Venture Manager shall, with respect to such interest, enjoy all of the rights
and be subject to all of the obligations and duties of a Joint Venturer.
5.6 Resignation or Removal of Joint Venture Manager.
5.6.1 Resignation of Joint Venture Manager. Any Joint Venture
Manager shall have the right to resign as a Joint Venture Manager by
delivering written notice to the other Joint Venture Manager, if any,
and the Joint Venturers.
5.6.2 Bankruptcy of a Joint Venture Manager. Upon his or its
adjudication as a bankrupt, any Joint Venture Manager shall
automatically be removed as a Joint Venture Manager.
5.6.3 Election of Successor Joint Venture Manager. In the
event a Joint Venture Manager shall have ceased to act as Joint Venture
Manager, and pursuant to Section 6.1.1, a successor Joint Venture
Manager or Joint Venture Managers are elected, such successors shall be
elected at a meeting called in accordance with Section 10.7 by vote of
a majority in interest of Joint Venturers. No person or entity shall be
elected as a successor Joint Venture Manager unless he or it shall
agree to accept all liabilities, duties and obligations hereunder, and
shall execute a copy of this Agreement as a Joint Venture Manager.
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5.6.4 Removal of Joint Venture Manager. Subject to the terms
of Article IX, a Joint Venture Manager may be removed, and in such
event, a successor Joint Venture Manager may be elected.
5.6.5 Effect of Removal. Upon the removal of the Joint Venture
Manager, the Joint Venture Manager shall receive an assignment from the
Joint Venture of an undivided ten percent (10%) interest in the Joint
Venture Properties and shall no longer be entitled to distributions, if
any, nor allocated Net Revenues, expenses and losses, if any, under
Article III hereof.
ARTICLE VI
DISSOLUTION AND WINDING-UP
OF THE JOINT VENTURE
6.1 Dissolution of the Joint Venture. The Joint Venture shall be
dissolved upon the happening of any of the following events:
6.1.1 The resignation, adjudication of bankruptcy, insanity,
legal disability or death of a Joint Venture Manager (or other
incapacity which prevents a Joint Venture Manager from effectively
discharging its duties hereunder), unless the remaining Joint Venture
Manager, if any, elects to continue the Joint Venture, or unless,
within a period of six (6) months from the date of such event, a
successor Joint Venture Manager or successor Joint Venture Managers are
elected by a vote of Joint Venturers having an aggregate Joint Venture
Percentage which is greater than fifty percent (50%), which successor
or successors elect to continue the business of the Joint Venture.
6.1.2 The vote of the Joint Venturers having an aggregate
Joint Venture Percentage which is greater than eighty percent (80%) and
receipt by the Joint Venture Manager of written notice of such
election.
6.1.3 The decision by the Joint Venture Manager, made in its
sole discretion, that it would be in the best interest of the Joint
Venture to dissolve and the delivery of written notice of such decision
to the Joint Venturers; provided, however, that Joint Venturers having
an aggregate Joint Venture Percentage greater than eighty percent (80%)
may notify the Joint Venture Manager in writing of their objection to
such decision within ten (10) days after delivery of notice of such
decision by the Joint Venture Manager, and such decision shall be
rescinded.
6.2 Winding-up of the Joint Venture. Upon the dissolution of the Joint
Venture pursuant to Section 6.1, the Joint Venture Manager shall serve as
liquidating trustee (except that if the dissolution occurred pursuant to Section
6.1.1 hereof, then a liquidating trustee shall be elected by a vote of those
Joint Venturers whose aggregate Joint Venture Percentages is in excess of fifty
percent [50%]) and shall take full account of the assets (except reserves
created pursuant to Section 6.4) shall be liquidated thereafter as promptly as
is consistent with obtaining the fair market value thereof. The proceeds
therefrom, to the extent sufficient, shall be applied and distributed in the
following order of priority:
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6.2.1 First, to the payment and discharge of all of the debts
and liabilities of the Joint Venture, if any, other than any loans and
advances made by the Venturers to the Joint Venture;
6.2.2 Next, to the payment and discharge of all of the loans
and advances, if any, made by the Venturers to the Joint Venture;
6.2.3 Next, after all allocations provided for in Article III
hereof have been made, to each Venturer with a positive capital account
in proportion to the relative capital account balances.
6.3 No Recourse. Except as otherwise provided in Section 10.4 hereof,
no Venturer shall be personally liable for the return of the capital
contributions of the Venturers, if and to the extent that any such return is
required, and any such return shall be made solely from the assets of the Joint
Venture.
6.4 Reserves. In winding up the affairs of the Joint Venture and
distributing its assets, the liquidating trustee provided for in Section 6.2
above shall set up such reasonable reserves as such trustee may deem necessary
to meet any contingent or unforeseen liabilities or obligations of the Joint
Venture. The liquidating trustee shall deposit funds for such purposes (together
with such funds held by the Joint Venture for distribution to the Venturers
which remain unclaimed after a reasonable period of time) with an escrow agent
for the purpose of establishing such reserves. The escrow agent so chosen by the
liquidating trustee is hereby authorized and directed to distribute the balance
thereafter remaining in the manner provided in Section 6.2 above at the
expiration of such reasonable period of time and pursuant to the instructions of
the liquidating trustee.
ARTICLE VII
BOOKS OR ACCOUNT, ACCOUNTING, REPORTS
FISCAL YEAR AND BANKING
7.1 Books of Account. The Joint Venture's books and records and this
Agreement shall be maintained at the office of the Joint Venture, and each
Venturer shall have access thereto and at all reasonable times. A separate
capital account shall be established and maintained for each Venturer in
accordance with Section 2.2 hereof. The books and records shall reflect all
Joint Venture transactions and shall be appropriate and adequate for the Joint
Venture's business.
7.2 Accounting and Reports. As soon as reasonably practicable after the
end of each fiscal year, each Joint Venturer shall be furnished with a copy of a
statement of income or loss of the Joint Venture for such year, and a statement
showing the amounts allocated to or allocated against such Joint Venturer
pursuant to Article III of this Agreement during or in respect of such year. Any
items of income, expense or credit allocated to him for purposes of the United
States federal income tax pursuant to Article III of this Agreement, all
prepared in accordance with the accounting method adopted by the Joint Venture,
all of which information will be reflected in the Joint Venture's federal income
tax return; and delivery of a copy of such tax return to each Joint Venturer
shall be sufficient to fulfill the obligation of the Joint Venture Manager with
respect to providing such information. A Joint Venture Manager or Joint Venturer
may request that the books and records of the Joint Venture be audited at the
end of any fiscal year, and
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any such audit shall be conducted by an independent certified public accountant
selected by the Venturer requesting the audit, and if such request is made by a
Joint Venturer, at the expense of the Joint Venturer requesting the audit. Upon
the request of a Joint Venturer or Joint Venturers owning Joint Venture
Percentages aggregating more than fifty percent (50%), such audit shall be made
at the expense of the Joint Venture by an independent certified public
accountant selected by the Joint Venture Manager. In addition, the Joint Venture
Manager will submit such other reports on a periodic basis, at least quarterly,
as they shall deem necessary to keep the Joint Venturers advised of the status
of Joint Venture operations.
7.3 Basis of Accounts and Fiscal Year. The Joint Venture shall maintain
its accounts on the accrual basis of accounting, and shall adopt a fiscal year
which shall begin on the first day of January and end on the thirty-first (31st)
day of December of each year.
7.4 Funds. All funds of the Joint Venture shall be deposited in a
separate bank account or accounts as shall be determined by the Joint Venture
Manager. All withdrawals therefrom shall be made upon checks signed by the Joint
Venture Manager or by any person authorized to do so by the Joint Venture
Manager.
ARTICLE VIII
POWER OF ATTORNEY
8.1 Power of Attorney. Each Joint Venturer hereby makes, constitutes
and appoints the Joint Venture Manager (and any successor Joint Venture Manager
duly elected pursuant to Section 5.6 or 6.1 hereof) his true and lawful
attorney-in-fact for him and in his name, place and stead and for this use and
benefit, from time to time:
8.1.1 To make all agreements amending this Agreement as now or
hereafter amended, that may be appropriate to reflect:
8.1.1.1 Change of the name or location of the
principal place of business of the Joint Venture;
8.1.1.2 The disposal by a Joint Venturer (including
himself) of his interest as a Joint Venturer in the Joint
Venture in any manner permitted by this Agreement;
8.1.1.3 A person (including himself) becoming an
additional or substituted Joint Venturer of the Joint Venture;
and
8.1.1.4 A change in any provisions of this Agreement
adopted in accordance with the provisions hereof, or the
exercise by any person of any right or rights hereunder;
8.1.2 To make such certificates, instruments and documents as
may be required by, or may be appropriate under, the laws of any state
or other jurisdiction in which the Joint Venture is doing or intends to
do business, in connection with the use of the name of the Joint
Venture by the Joint Venture; and
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8.1.3 To make such certificates, instruments and documents as
such Joint Venturer may be required to make, or as may be appropriate
for such Joint Venturer to make, by the laws of any state or
jurisdiction to reflect:
8.1.3.1 A change of name or address of such Joint
Venturer; or
8.1.3.2 Any changes in or amendments of this
Agreement, but only if and when such changes are in strict
accordance with the provisions of this Agreement.
Each of such agreements, certificates, instruments and documents shall
be in such form as such attorney-in-fact and counsel for the Joint Venture shall
deem appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include without limitation the
powers to sign, execute, acknowledge, swear to, verify, deliver, file, record or
publish the same.
Each Joint Venturer hereby (i) authorizes such attorney-in-fact to take
any further action which such attorney-in-fact shall consider necessary or
advisable in connection with any of the foregoing, (ii) gives such
attorney-in-fact full power and authority to do and perform each and every act
or thing whatsoever requisite or advisable to be done in or about the foregoing
as fully as such Joint Venturer might or could do if personally present, and
(iii) ratifies and confirms all that such attorney-in-fact shall lawfully do or
cause to be done by virtue hereof.
8.2 Duration of Power. The power of attorney granted under Section 8.1
hereof:
8.2.1 Is a special power of attorney coupled with an interest
and is irrevocable;
8.2.2 May be exercised by such attorney-in-fact by listing all
of the Joint Venturers executing any agreement, certificate, instrument
or document with the single signature of such attorney-in-fact acting
as attorney-in-fact for all of them; and
8.2.3 Shall survive the delivery of an assignment by a Joint
Venturer of the whole or a portion of his interest in the Joint
Venture; except that where such assignment is of such Joint Venturer's
entire interest in the Joint Venture and the purchaser, transferee or
assignee thereof, with the consent of the Joint Venture Manager, is
admitted as a substituted Joint Venturer, the power of attorney shall
survive the delivery of such assignment for the sole purpose of
enabling such attorney-in-fact to execute, acknowledge and file any
such agreement, certificate, instrument or document necessary to effect
such substitution.
ARTICLE IX
AMENDMENTS, REMOVAL OF JOINT VENTURE MANAGER
9.1 Proposals by Joint Venturers. The Joint Venture Manager may, and at
and within thirty (30) days after the request of the Joint Venturers owning
Interests representing twenty percent (20%) or more of the Interests owned by
all Joint Venturers shall submit to all the Venturers the text of any proposal
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to (a) amend this Agreement, (b) dissolve and terminate the Joint Venture, (c)
remove a Joint Venture Manager and substitute a new Joint Venture Manager, (d)
approve or disapprove the sale of all or substantially all the assets of the
Joint Venture, or (e) cancel any contract between the Joint Venture and a Joint
Venture Manager, without penalty to the Joint Venture, upon sixty (60) days
written notice to the Joint Venture Manager together with a statement of the
purpose of any such proposal. The Joint Venture Manager may include in any
submission its view as to the proposal. Subject to Section 9.2, any such
proposal shall be adopted if, within thirty (30) days after the mailing of such
proposal to all Venturers, the Joint Venture Manager shall have received written
approval thereof from a majority in interest of the Joint Venturers except that
no proposal may without the written approval of all the Venturers: (i) increase
the liability of the Venturers; (ii) alter the rights and obligations set forth
in Article III hereof; (iii) change the capital contributions required of
Venturers under this Agreement; (iv) enlarge the liability of the Joint Venture
Manager to Joint Venturers; (v) amend this Article IX; or (vi) change the
provisions relating to the dissolution and termination of the Joint Venture. The
date of adoption of such proposal shall be the date on which the Joint Venture
Manager shall have received the requisite written approvals. Any proposal which
is not adopted may be resubmitted. In the event any proposal is not adopted, any
written approval received with respect thereto shall become void and shall not
be effective with respect to any resubmission of such proposal.
9.2 Evidence of Legal Authority. Notwithstanding the foregoing, any
rights of a majority in interest of the Joint Venturers under Section 9.1 shall
not come into existence or be effective in any manner unless and until Section
9.2.1 below has been satisfied:
9.2.1 Either a favorable ruling shall have been received by
the Joint Venture from the Internal Revenue Service to the effect that
neither the grant nor the exercise of such rights will adversely affect
the tax status of the Joint Venture or of any of the Joint Venturers,
or counsel for the Joint Venturers (acceptable to the Joint Venture)
shall have delivered to the Joint Venture an opinion (acceptable to the
Joint Venture) to the same effect. Counsel for the Joint Venturers as
hereinabove described shall be other than counsel for the Joint Venture
Manager and such counsel must be acceptable to a majority in interest
of the Joint Venturers.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Notices. Any notice, payment, demand or communication required or
permitted to be given by a provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if delivered personally to
the party or to an officer of the party to whom the same is directed, or if
sent, by deposit with the United States Mail, postage and charges prepaid,
addressed as follows: if to the Joint Venture Manager, at the principal mailing
address of the Joint Venture; if to a Joint Venturer, at such Joint Venturer's
address set forth in Exhibit "1" to this Agreement described in Section 2.5
hereof, or to such other address as shall be furnished in writing by any party
to the other. Any such notice shall be deemed to be given as of the date
delivered, if delivered personally, or as of the date on which the same was
deposited in the United States Mail, addressed and sent as aforesaid.
10.2 Section Headings. Section, paragraph and other headings contained
in this Agreement are for reference purposes only and are in no way intended to
describe, interpret, define, amplify or limit the scope, extent or intent of
this Agreement or any provision hereof.
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10.3 Further Action. Each Venturer shall execute and deliver such
papers, documents and instruments, and perform such acts as are necessary or
appropriate, to implement the terms hereof and the intent of the parties hereto.
10.4 Indemnity. Each Venturer shall be liable to the extent of its
respective interest ("Liability Interest"). Each Venturer agrees to indemnify
and hold harmless the other Venturers from and against any and all claims,
losses, damages, costs or expenses of any kind or character in excess of each
respective Venturer's Liability Interest arising out of any transaction
contemplated by this Agreement or resulting therefrom.
10.5 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, the legality, validity and enforceability of the
remaining provisions of this Agreement shall not be affected thereby, and in
lieu of each such illegal, invalid and unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
10.6 Amendments by Power of Attorney. Notwithstanding other provisions
of Article IX or any other provisions of this Article X, amendments to this
Agreement which are of an inconsequential nature and do not adversely affect the
Venturers in any material respect, or are necessary or desirable to comply with
any applicable law or governmental regulation, or are required or contemplated
by this Agreement, may be made by the Joint Venture Manager through use of the
power of attorney granted by Article VIII of this Agreement. In this regard, the
Joint Venture Manager shall have the full power and authority to amend any
provision of this Agreement so as to conform, in the sole judgment of the Joint
Venture Manager, the provisions of this Agreement with regulations adopted by
the Treasury Department relating to Section 704(b) of the Code; provided,
however, any such amendment shall not cause the contributions required of any
Venturer to be increased, or adversely affect the Joint Venturers in any
material respect.
10.7 Meetings. Meetings of the Venturers may be called by the Joint
Venture Manager and shall be called upon the written request of Joint Venturers
having an aggregate Joint Venture Percentage of a least twenty-five percent
(25%). The call shall state the nature of the business to be transacted. Joint
Venturers may vote in person or by proxy at any such meeting, and shall be given
written notice at least ten (10) days prior to such meeting.
10.8 Right to Rely upon the Authority of Joint Venture Manager. No
person dealing with a Joint Venture Manager shall be required to determine its
authority to make any commitment or undertaking on behalf of the Joint Venture,
nor to determine any fact or circumstance bearing upon the existence of its
authority. In addition, no purchaser of any property or interest owned by the
Joint Venture shall be required to determine the sole and exclusive authority of
the Joint Venture Manager to sign and deliver on behalf of the Joint Venture any
such instrument of transfer, or to see to the application or distribution of
revenues or proceeds paid or credited in connection therewith, unless such
purchasers shall have received written notice affecting the same.
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10.9 Texas Law. It is the intention of the parties that the laws of
Texas govern the determination of the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the parties.
10.10 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives, during the term of the Joint Venture, any right that it may
have to maintain any action for partition with respect to the Joint Venture
Properties.
10.11 Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had signed
the same document. All counterparts shall be construed together and shall
constitute one agreement.
10.12 Parties in Interest. Subject to the provisions contained in
Article V hereof, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the heirs, legal representatives, successors and assigns of the respective
parties hereto.
10.13 Integrated Agreement. This Agreement constitutes the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof, and there are no agreements, understandings, restrictions,
representations or warranties among the parties other than those set forth
herein or herein provided for.
10.14 No Election. No election shall be made by the Joint Venture, the
Joint Venture Manager, or any Joint Venturer, for the Joint Venture to be
excluded from the application of the provisions of Subchapter K of the Code.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the _____ day of ____________, 1999.
JOINT VENTURE MANAGER
TBX Resources, Inc.
By:
---------------------------------
Tim Burroughs, President
ORIGINAL JOINT VENTURER
------------------------------------
Tim Burroughs
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THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public in and for the
State of Texas, on this day personally appeared Tim Burroughs, President of TBX
Resources, Inc., a Texas corporation, known to me to be the person whose name is
subscribed to the foregoing instrument, and upon his oath swore to me that he
executed the same for the purposes and consideration therein expressed, and in
the capacity therein stated.
SUBSCRIBED AND SWORN TO BEFORE ME, the undersigned authority, on this
the _____ day of ____________________, 1999.
----------------------------------------------
Notary Public in and for the State of Texas
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THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public in and for the
State of Texas, on this day personally appeared Tim Burroughs known to me to be
the person whose name is subscribed to the foregoing instrument, and upon his
oath swore to me that he executed the same for the purposes and consideration
therein expressed.
SUBSCRIBED AND SWORN TO BEFORE ME, the undersigned authority, on this
the _____ day of ____________________, 1999.
----------------------------------------------
Notary Public in and for the State of Texas
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EXHIBIT 99.10
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter of Transmittal 1
Petroleum Engineer's Certificate of Qualification 6
Parameters used in Property Appraisals 7
Classifications of Reserves 8
Definitions 8
Cash Flow Values Summarized by Reserve Category 9
Cash Flow Values Summarized by Field and Reserve Category 10
Geologist's Location and Description of Properties 11
Geological Discussions 14
Geologist's Certificate of Qualification 19
Geologist's Declaration of Consent & Confidentiality 22
Reserve Summaries Total TBX Package Summarized Annually 23
Bethany, N.E. Field Planned Development Program, Discussion, Summaries
by Reserve Category & Individual Economics 27
East Texas Field Summaries by Reserve Category & Individual Economics 48
Mitchell Creek & Talco Fields
Discussion, Summaries by Reserve Category
& Individual Economics 54
Manziel, Quitman & Misc. Wood Co. Fields
Discussion, Summaries by Reserve Category
& Individual Economics 70
Production Graphs
Maps & Plats
</TABLE>
<PAGE> 2
July 30, 1999
Mr. Tim Burroughs
TBX Resources, Inc.
12300 Ford Road, Suite 265
Dallas, Texas 75234
Re: Appraisal of Oil & Gas Properties
Located in East Texas Area
Dear Mr. Burroughs:
As you requested, we examined all available data on certain oil and gas
leases to project and evaluate future reserves associated with those properties
as of July 1, 1999. The working interest ownership appraised herein was supplied
by your office and varies from lease to lease. This report is an appraisal of
proved producing, proved nonproducing and Proved Undeveloped crude oil and
natural gas reserves attributable to the subject leases after July 1, 1999.
Estimated proved and Proved Undeveloped reserves attributable to the
working interest ownership appraised herein and the resultant net cash flow
values are summarized as follows:
<TABLE>
<CAPTION>
NET RESERVES NET 10% DISC.
RESERVE CATEGORY OIL (BBLS) GAS (MCF) CASH FLOW CASH FLOW
<S> <C> <C> <C> <C>
Proved Producing 162,007 0 $ 1,528,257 $ 959,182
Proved Nonproducing 339,011 446,155 3,134,484 1,759,278
Proved Undeveloped 753,094 4,911,218 13,799,470 5,735,849
TOTALS 1,254,112 5,357,373 $ 18,462,211 $ 8,454,309
</TABLE>
1
<PAGE> 3
Mr. Burroughs
TBX Resources, Inc.
July 30, 1999
For the nine leases included in the "Proved Producing Reserves" category, we
predict cumulative gross recoverable reserves of 210,270 barrels of crude oil
with no appreciable natural gas production or sales. Cumulative net reserves
attributable to the appraised interests would be 162,007 barrels of crude oil.
Those reserves are expected to generate a future cash flow of $1,528,257 after
severance taxes, ad valorem taxes and operating expenses. Present worth of that
cash flow, based on a 10% discount factor, would be $959,182. The cumulative
cash flow value for each reserve category is also shown discounted at 9%, 12%,
15% and 20% on page 9 titled "Cash Flow Values Summarized by Reserve Category".
On page 10, we have summarized these properties by reserve category under the
field in which they are producing. This summary also shows gross and net
production as well as cumulative net cash flow values and cash flow values
discounted at 10%, 9%, 12%, 15% and 20%.
As you will note on the production graphs, some of the leases in the
"Proved Producing" category have been shut-in for several months by operator's
choice due to current market conditions. As crude oil prices increase, these
leases will be put back on production with little or no investment required to
reach and maintain the projected production decline.
There are 15 leases included in the "Nonproducing Reserves" category.
This includes behind pipe reserves and projected reserves attributable to
shut-in properties where an investment will be required before they are put back
on line. Many of the shut-in wells have been off production for several years.
Consequently, we had to make some assumptions as to what would happen in the
future. For purposes of this report, we assumed that each well/lease could be
returned to production at about the same rate as before it was shut-in, with
declines typical of past production. Workover costs were increased according to
the length of shut-in time, to account for deterioration and corrosion of
downhole equipment. Routine operating costs were increased in proportion to
water production, which ranges from 100 barrels to 8,000 barrels per month. We
used a fairly liberal estimate of workover costs, so that any funds not spent
putting wells back on production would be available to provide disposal
facilities for produced water.
Our study also covers 41 development wells to be drilled in the
Bethany, N.E. Field and included in the Bethany, N.E. Unit #3. These reserves
are included in the "Proved Undeveloped Reserves" category. All existing wells
in the Bethany, N.E. Unit #3 are currently off production and the reserves
attributable to those shut-in wells are included in the "Nonproducing Reserves"
category.
2
<PAGE> 4
Mr. Burroughs
TBX Resources, Inc.
July 30, 1999
As shown on the development map, the Bethany, N.E. Unit #3 is a
2,336-acre block in Panola County, Texas. This unit contains many shut-in wells,
all of which are completed in one or more of the Jenkins, Woolworth or
Mooringsport oil zones, at depths of approximately 3700-3850 feet. We have not
toured the area, but the operator assured us that most of the wells are equipped
for production. The wells were drilled in the 1950's and 1960's and produced
primary oil until June 1967. The field was then unitized as a waterflood
project, but has been described as more of a water disposal project than a
waterflood, leading to the conclusion that oil may be trapped between the
existing wells. In addition, there are four shallow gas zones - Nacatoch,
Blossom, Goodland Lime and Paluxy - that are productive in the area, with some
direct producing offsets.
In order to make an intelligent prediction of future reserves, we
divided the Bethany, N.E. Field project into three phases, as shown below:
Phase 1. Reactivation of one existing well and convert a shut-in producer to a
disposal well (included as Nonproducing Reserves).
Phase 2. Reactivation of eleven existing wells (included as Nonproducing
Reserves). Drilling 31 oil and/or gas development wells (included as
Proved Undeveloped Reserves).
Phase 3. Drilling of 10 in-field development wells (included as Proved
Undeveloped Reserves).
A detailed description of the planned development of the Bethany,
N.E. Field, as provided by the operator and geologist, can be found on page 28
of this report. The actual time frame for drilling any of these wells is, of
course, not known. We used an estimated timetable for drilling and completion of
all wells, but actual timing will undoubtedly be different. We think overall
reserves will be approximately as predicted, but we must point out that the gas
zones within the subject acreage have not been tested, and available oil
reserves are based on the probability of bypassed oil in the waterflood zones.
Investment and drilling costs for this project will vary widely because
of the shut-in status of many wells due to low oil prices and because well range
in depth from just over 1000 feet to 5000 feet. Phase 1 investment costs are
easily discernible on the Phase 1 summary, page 31. Phase 2 workover costs will
range from little more than flipping a switch to clean-out and equipment
replacement costing $15,000 or more. For
3
<PAGE> 5
Mr. Burroughs
TBX Resources, Inc.
July 30, 1999
that phase we used investment costs of $10-15,000 per well. For drilling and
completing the Paluxy wells, we used $100,000 per well. We assigned $130,000 per
well for the ten development wells, and for the shallow gas wells from 1200 to
2800 feet we used drill-and-complete costs of $85,000 each. Operating costs
supplied by the operator were used for producing properties and provided the
basis for our cost estimates for wells to be drilled in the future.
Included on pages 12 through 18 are the lease locations, property
descriptions and geological discussions on each of these properties, as provided
by the geologist.
On page 23 you will find the overall summary of Total Reserves and
a one line summary showing cumulative values for each reserve category.
Following the overall summary on pages 24 through 26 are the individual
summaries for each reserve category including a one line summary showing
cumulative values by Field designation. Behind the reserve summaries and divided
into Field designations, are individual economic analyses for each property,
grouped and summarized into reserve categories. Production graphs showing
production histories and projected future declines are also included. Behind the
production graphs are the location maps and plats.
Oil volumes shown on the summaries and individual well analyses
beginning on page 23 are generally expressed in thousands of barrels (MBBL),
where one barrel is equivalent to 42 United States gallons. Gas volumes are
expressed in millions of standard cubic feet (MMCF) at 60 degrees Fahrenheit and
the contract pressure base. Income on the individual analyses is generally shown
as thousands of U.S. dollars (M$).
The reserves presented in this report are estimates only and
should not be construed as being exact quantities. They may or may not be
recovered, and if recovered, the revenues therefrom and the costs and expenses
associated therewith may be more or less than the estimated amounts. Because of
governmental policies, uncertainty of supply and demand, and international
politics, actual sales rates and prices actually received for the produced
reserves, as well as the cost of recovering those reserves, may vary from the
assumptions included in this report. Further, estimates of reserves may increase
or decrease as a result of future operational decisions, mechanical problems
and/or oil and gas prices.
All reserve estimates have been performed in accordance with sound
engineering principles and generally accepted industry practice. As in all
aspects of oil
4
<PAGE> 6
Mr. Burroughs
TBX Resources, Inc.
July 30, 1999
and gas evaluation, there are uncertainties inherent in the interpretation of
engineering data, and all conclusions represent only informed professional
judgments. We made no attempt to determine a risk factor for the various
properties, since we have presented herein a wide range of discount factors for
the reader's use.
Ownership title to the properties evaluated herein has not been
examined by Harold Neff & Associates, Inc., nor has the actual degree or type of
interest owned been independently confirmed. We obtained the data used in our
estimates from the operator and from sources providing publicly accessible data,
and consider it to be accurate.
A visual inspection of the properties included herein was not
considered necessary for the purpose of this report. No assessment of compliance
with environmental regulations or future liability for site remediation was
made. Harold Neff and Associates, Inc. is an independent consulting firm and
neither it nor any of its principals or employees owns any interest in these
properties. Our employment for this evaluation is not contingent on the sale of
these properties.
We trust this is the information you require. Please call us if
you have any questions.
Yours truly,
HAROLD NEFF & ASSOCIATES, INC.
Harold O. Neff
Tom Neff
HON/TN:sf
5
<PAGE> 7
CERTIFICATE OF QUALIFICATION AND CONSENT STATEMENT
HAROLD NEFF & ASSOCIATES, INC.
REPORT FOR
TBX RESOURCES, INC.
DATED JULY 30, 1999
1. NAME & ADDRESS Harold O. Neff
102 N. College, Suite 300
Tyler, Texas 75702
2. EDUCATION B. S. in Mechanical Engineering
Kansas State University, 1949
3. PROFESSIONAL REGISTRATION Registered Professional Engineer
State of Texas No. 14678
State of Louisiana No. 12954
4. PROFESSIONAL AFFILIATION Society of Petroleum Engineers
Senior Member
5. PROFESSIONAL EXPERIENCE
Consulting Petroleum Engineer for more than 40 years. Five years with Speller
& Key, Inc.; 20 years as independent consultant; 18 years as President of
wholly-owned independent petroleum consulting corporation. Wide range of
experience in drilling, completion, production, appraisals, waterflooding,
official hearings, etc.
6. The information used in preparing the accompanying report was obtained from
the operator, the geologist, the files of the Railroad Commission of Texas
and our company files.
7. TBX Resources, Inc. is hereby granted permission to use this report in any
lawful manner.
8. Neither Harold Neff & Associates, Inc. nor any of its principals or employees
owns any interest in the properties evaluated in this report, or in
securities of TBX Resources, Inc. and does not expect to own or hold any
interest in the properties or securities of TBX Resources, Inc. in the
future.
6
(seal on original) (original signed) Harold O. Neff
- ----------------------------------- ------------------------------------
Registered Professional Engineer Harold O. Neff
<PAGE> 8
PARAMETERS USED IN APPRAISAL
Crude Oil Prices - Pricing for the higher gravity crude oil was set at
$18/barrel held constant for the life of the property. The heavier, low gravity
crude oil was evaluated using a price of $15.50/barrel held constant for the
life of the property.
Natural Gas Prices - Gas pricing was set at $2.40/MCF held constant for
the life of the property. These costs include transportation and processing fees
where applicable.
Operating Costs - For producing properties, current operating expenses,
as provided by the operator, were used in 1999. For nonproducing and undeveloped
properties, we used estimated costs, also provided by the operator. These
expenses were held constant for the life of the property.
Cash Flow Discounting - We used a primary discount factor of 10%, with
values shown for 9%, 12%, 15% and 20% discounting. These values are shown at the
bottom of the summary pages and individual well analyses.
Ad Valorem Taxes - Estimated ad valorem taxes are included as a
function of normal operating expenses.
Severance Taxes - We used Texas severance taxes of 7.5% for gas sales
and 4.6% for crude oil sales.
Salvage Value - For this report, it has been assumed that the salvage
value of the lease equipment at the time of abandonment will offset the costs
associated with plugging the wells.
7
<PAGE> 9
CLASSIFICATION OF RESERVES
The petroleum reserves included in this report are classified as Proved
Producing, Proved Non-Producing or Proved Undeveloped Reserves. These classes of
petroleum reserves are defined as follows:
Proved Reserves - Estimated volumes of crude oil or natural gas judged
to be economically recoverable in future years from known reservoirs under
current technology and existing economic conditions.
Proved Producing Reserves - Reserves expected to be recovered from
existing completion intervals perforated and tested at the time of the estimate
and producing in existing wells. In this report, this category includes reserves
recoverable from properties shut-in by choice of the operator due to market
conditions, such as low product pricing, availability of transmission lines,
etc.
Proved Nonproducing Reserves, - Reserves expected to be recovered from
zones behind casing in existing wells, where additional completion work or a
future recompletion will be required before the start of production. Also
includes reserves attributable to wells shut-in for mechanical reasons that will
require an investment to repair or replace downhole or surface equipment, and
the time when sales will start is uncertain.
Proved Undeveloped Reserves - Reserves that are expected to be
recovered from new wells on undrilled acreage, from deepening existing wells to
a different reservoir, or where a relatively large expenditure is required to
recomplete an existing well or to install production or transportation
facilities for primary or improved recovery projects.
DEFINITIONS
Gross Reserves - The total estimated petroleum hydrocarbons to be
produced from the appraised properties after July 1, 1999.
Net Reserves - That portion of the gross reserves attributable to the
net revenue interests appraised herein after deducting all royalty burdens and
working interests owned by others.
Net Cash Flow Value - Revenue attributable to the appraised interests
from the production and sale of estimated net reserves after deducting all
severance and ad valorem taxes, operating expenses and capital investments.
Federal income taxes were not taken into account in the preparation of this
report.
Discounted Cash Flow Values - These values represent a calculation of
the present worth of the future net cash flow values discounted at rates of 10%,
9%, 12%, 15% or 20%. Present worth as expressed herein should not be construed
as fair market value since it does not take into account salvage value of
surface and subsurface equipment, return on investment and business risks.
8
<PAGE> 10
CASH FLOW VALUES SUMMARIZED BY RESERVE CATEGORY
DISCOUNTED AT 0%, 10%, 9%, 12%, 15% AND 20%
<TABLE>
<CAPTION>
RESERVE CATEGORY DISC. CASH DISC. CASH DISC. CASH DISC. CASH DISC. CASH DISC. CASH
LEASE NAME FLOW @ 0% FLOW @ 10% FLOW @ 9% FLOW @ 12% FLOW @ 15% FLOW @ 20%
- ------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Proved Producing Reserves
Bethany, N.E. Properties $0 $0 $0 $0 $0 $0
East Texas Field Properties 43,167 30,290 31,246 28,535 26,240 23,125
Mitchell Creek & Talco Field 1,054,153 672,062 697,524 626,340 568,418 492,827
Manziel, Quitman & Wood Co. 430,936 256,830 267,901 237,178 212,726 181,605
----------- ---------- ---------- ---------- ---------- ----------
Totals 1,528,257 959,182 996,671 892,053 807,384 697,557
Proved Non-Producing Reserves
Bethany, N.E. Properties 1,384,863 685,486 731,853 602,743 499,240 367,394
East Texas Field Properties 0 0 0 0 0 0
Mitchell Creek & Talco Field 1,044,473 709,210 734,258 663,153 602,779 520,547
Manziel, Quitman & Wood Co. 705,148 364,582 388,100 322,168 268,212 197,757
----------- ---------- ---------- ---------- ---------- ----------
Totals 3,134,484 1,759,278 1,854,212 1,588,065 1,370,231 1,085,698
Proved Undeveloped Reserves
Bethany, N.E. Properties 13,799,470 5,735,849 6,216,108 4,901,245 3,900,481 2,703,408
East Texas Field Properties 0 0 0 0 0 0
Mitchell Creek & Talco Field 0 0 0 0 0 0
Manziel, Quitman & Wood Co. 0 0 0 0 0 0
----------- ---------- ---------- ---------- ---------- ----------
Totals $13,799,470 $5,735,849 $6,216,108 $4,901,245 $3,900,481 $2,703,408
----------- ---------- ---------- ---------- ---------- ----------
Grand Totals $18,462,210 $8,454,309 $9,066,990 $7,381,364 $6,078,096 $4,486,663
</TABLE>
9
<PAGE> 11
SUMMARY OF GROSS RESERVES, NET RESERVES
AND CASH FLOW VALUES DISCOUNTED AT 0%, 10%, 9%, 12%, 15% & 20%
<TABLE>
<CAPTION>
NET INCOME AFTER EXPENSES
LEASE NAME GROSS RESERVES NET RESERVES CUMULATIVE CUM. DISC.
RESERVE CATEGORY OIL (Bbls) GAS (MCF) OIL(Bbls) GAS (MCF) CASH FLOW CASH FLOW@0%
- ---------------------------- ---------- ---------- ---------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bethany, N.E. Properties
Proved Non-Producing 124,650 575,684 96,604 446,155 $ 1,384,863 $ 685,486
Proved Undeveloped 971,735 6,337,054 753,094 4,911,218 13,799,470 5,735,849
East Texas Field Properties
Proved Producing 13,551 0 11,336 0 43,167 30,289
Mitchell Creek & Talco Field
Proved Producing 140,507 0 108,498 0 1,054,153 672,067
Proved Non-Producing 138,048 0 110,438 0 1,044,473 709,210
Manziel, Quitman & Wood Co.
Proved Producing 56,212 0 42,172 0 430,936 256,830
Proved Non-Producing 176,912 0 131,969 0 705,148 364,582
--------- --------- --------- --------- ----------- ----------
TOTALS 1,621,614 6,912,738 1,254,111 5,357,373 $18,462,210 $8,454,310
</TABLE>
<TABLE>
<CAPTION>
DISCOUNTED NET INCOME AFTER EXPENSES
LEASE NAME DISC. CASH DISC. CASH DISC. CASH DISC. CASH
RESERVE CATEGORY FLOW@9% FLOW@12% FLOW@15% FLOW@20%
- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bethany, N.E. Properties
Proved Non-Producing 731,853 602,743 499,240 367,394
Proved Undeveloped 6,216,108 4,901,245 3,900,481 2,703,408
East Texas Field Properties
Proved Producing 31,246 28,535 26,240 23,125
Mitchell Creek & Talco Field
Proved Producing 697,524 626,340 568,418 492,827
Proved Non-Producing 734,258 663,153 602,779 520,547
Manziel, Quitman & Wood Co.
Proved Producing 267,901 237,178 212,726 181,605
Proved Non-Producing 388,100 322,168 268,212 197,757
--------- --------- --------- ---------
TOTALS 9,066,990 7,381,364 6,078,096 4,486,663
</TABLE>
10
<PAGE> 12
LOCATION AND DESCRIPTION OF PROPERTIES
PREPARED FOR
TBX RESOURCES, INC.
DALLAS, TEXAS
BY
B. J. OLIVER, CERTIFIED PETROLEUM GEOLOGIST
Inwood National Bank Building
1100 Centennial Boulevard, Suite 150
Richardson, TX 75081
11
<PAGE> 13
LOCATION AND DESCRIPTION OF PROPERTIES
The TBX Resources leases are located within the northern part of the
prolific East Texas Salt Basin. The Earliest exploration in this area dates back
to the early 1920 and 1930's when frontier oil producers were exploring areas
adjacent to the famous "East Texas Field" located near the town of Kilgore,
Texas. TBX has leasehold rights in eight oil and gas fields in Gregg, Hopkins,
Franklin, Panola and Wood Counties, Texas approximately 100-150 miles east of
Dallas. The enclosed Oil & Gas Map shows the physical location of each of the
existing properties within the East Texas Salt Basin.
The leases evaluated herein and the associated fields from which they
are producing are listed below:
BETHANY, N.E. FIELD
Bethany, N.E. Waterflood Unit #3 - Located in northern Panola County,
Texas. Includes three producing wells which are temporarily off-line
(see page 29), three water supply wells, one injection well currently
being re-engineered, and ten shut-in wells.
EAST TEXAS FIELD
Roy H. Laird / Blk. 122 - Located within the city limits of Kilgore in
southern Gregg County, Texas. Includes two producing wells.
J.T. Florence Lease - Located within the city limits of Kilgore in
southern Gregg County, Texas. Includes one shut-in, but producible
well.
Prothro Lease - Located within the city limits of Kilgore in southern
Gregg County, Texas. Includes one producing well.
MITCHELL CREEK AND TALCO FIELDS
J.L. Hedrick Lease - Located in the Mitchell Creek Field in Hopkins
County, Texas. Includes one producing well, one injection well and
three shut-in wells.
J.L. Watts Lease - Located in the Mitchell Creek Field in Franklin
County, Texas. One shut-in well.
Hagansport Unit - Located in the Talco Field in Franklin County, Texas.
Includes two producing wells, five injection wells and twelve shut-in
wells.
Ray Briley Lease - Located in the Talco Field in Franklin
County, Texas. One injection well, three shut-in wells.
Lillie J. Gallatin Lease - Located in the Talco Field in
Franklin County, Texas. Two shut-in wells.
B.R. Grimes Lease - Located in the Talco Field in Franklin
County, Texas. Two shut-in wells.
V.W. Jennings Lease - Located in the Talco Field in Franklin
County, Texas. One producing well, one injection well.
12
<PAGE> 14
Claude Nichols Lease - Located in the Talco Field in Franklin
County, Texas. Two injection wells.
Myrtle P. Haydon Lease - Located in the Talco Field in
Franklin County, Texas. One producing well, one injection well
and five shut-in wells.
MANZIEL, QUITMAN AND MISC. WOOD COUNTY FIELDS
H.H. Noe #1 - Located in the Manziel Field in Wood County, Texas.
Includes one producing well.
Hudson Lease - Located in the Manziel Field in Wood County, Texas.
Includes one shut-in well.
M.A. Hudson etal Unit #1 - Located in the Manziel Field in Wood County,
Texas. Includes one shut-in well.
M.A. Hudson Unit -A- #1 - Located in the Manziel Field in Wood County,
Texas. Includes one shut-in well.
M.A. Hudson Unit -B- #2 - Located in the Manziel Field in Wood County,
Texas. Includes one shut-in well.
J.H. McElyea #1-A - Located in the Manziel Field in Wood County, Texas.
Includes two shut-in wells.
Plocher-Rappe-Turner #1-B - Located in the Quitman Field in Wood
County, Texas. Includes one shut-in, but producible well.
Rappe-Turner #1-A - Located in the Quitman Field in Wood County, Texas.
Includes one producing well.
Republic Insurance Co. #3 - Located in the Quitman Field in Wood
County, Texas. Includes one producing well.
Rappe-Turner #3 - Located in the Quitman Field in Wood County, Texas.
Includes one shut-in well.
Rappe Turner #1 - Located in the Quitman Field in Wood County, Texas.
Includes one producing well.
McDade-Curry Unit #1 - Located in the Merigale-Paul Field in Wood
County, Texas. Includes one shut-in well.
W.A. Moseley #1 - Located in the Norman Paul Field in Wood County,
Texas. Includes one shut-in well.
J. L. Jacobs Lease - Located in the Winnsboro, S.E. Field in Wood
County, Texas. Includes one shut-in well.
13
<PAGE> 15
GEOLGICAL DISCUSSION OF N. E. BETHANY FIELD LEASES
The N.E. Bethany Waterflood Unit 3 lease covers some 2,336 acres
located on the northwest side of a very large anticlinal structure in the
northeast corner of Panola County. The field is on a large northeast-southwest
trending anticline situated on the central portion of the major Sabine uplift
with oil and gas wells covering the entire area from a shallow depth of 1,000
feet to as deep as 12,000 feet. There are two separate closures superimposed on
this anticline, one at the north end and one at the south end of the anticline.
Porosity is of major importance to the accumulation of oil and gas at the
Bethany anticline. TBX Resources controls the oil and gas rights to a depth of
about 3,900 feet through the Upper Glenn Rose Formation and Mooringsport
limestone oil reservoirs by ownership in the N.E. Bethany waterflood unit 3
which unitized some 2,336 acres of leases. The original wells were drilled by
major oil companies, like Socony-Mobil and Union Producing in the early 1960's
to produce three oil zones in the Upper Glenn Rose Group called the Jenkins sand
at 3650', the Woolworth sand at 3700' and the Mooringsport lime at 3,850'. These
three oil zones were commingled into a common tank battery after unitization and
a poorly designed waterflood program was initiated with disposal wells on the
ends and flanks of the producers. There was not sufficient injection water
available from the producing zones, so water supply wells were drilled and we
are told that even fresh water was used which causes many oil production
problems when dissimilar formation waters are used in a waterflood with the
matrix rock pore clays. The waterflood was poorly designed from the start and
its only function was to dispose of the produced water. These Cretaceous aged
sandstone and limestone reservoirs were never successfully flooded because
natural water-drive reservoirs can not be effectively waterflooded due to
natural water drive in the zones themselves. Therefore, much of the oil was
never produced as the well spacings were too great for proper recover. The
distance between the wells was as great as 1,500 to 2,000 feet between wells on
80 acres. In the 1960 to about 1978, it was common practice throughout most of
the East Texas Basin to flare the natural gas in order to produce the oil
because the price of gas was so low that it was uneconomic to collect the gas
for transmission and sales. Our study of the well logs on the N. E. Bethany
leases reveals a great many opportunities to drill new wells between the distant
spaced oil producers for reserves left behind in the three main oil zones of the
Jenkins, Woolworth, Mooringsport; to re-complete and re-equip existing wells on
the leases. For the most part all the wells on the leases have heavy 7 inch
casing cemented in the old wells.
We have identified one well on the lease, # 1101, which now can be re-entered
with 7 inch casing and re-completed as a gas well in a 8 foot thick high
porosity Paluxy sand at 2,900 ft. The well logs clearly show this zone to have
high porosity from 24 to 29% by Sonic log with a bed resistivities between 10 to
14 ohms for a zone water saturation between 29 to 34% which calculates gas
filled. The sand in this well can be correlated some 9,200 feet to the east to
be the same stratigraphic reservoir and is 2 feet structurally high to
"look-a-like" gas producer drilled by Pennzoil Production Company completed for
over 2,640 MCF of gas per day. This "look-a-like" well has produced over 751
million cuft. of gas from a 10 foot thick, Paluxy sand with 24 % porosity sand
and 7 ohms resistivity for a 42% water saturation. This well is still producing
gas after producing 751,062 mcf of gas to 1-1-1999. There are more than 42 well
completions in these Paluxy sands in the Bethany field area at depths of 2,500
to 3,300 ft. with gas well recoveries from 200 Million to over 1.160 Billion
cuft. of gas per well. There are other wells on TBX tracts with similar possible
gas zones in separate Paluxy sands which are cased up hole behind pipe reserves.
14
<PAGE> 16
GEOLGICAL DISCUSSION OF N. E. BETHANY FIELD LEASES (CONT'D)
In addition to the 2,900 foot Paluxy sand gas potential, the lease has
proven potential in the Blossom sand member at 1,900 to 2,000'. The well logs
clearly show that these sands have good porosity and contains gas with some
associated oil. As far back are 1922 to 1930, the main leases on the N.E.
Bethany field produced gas for leasehold and house-farm use from as many as 15
wells throughout the lease. We have driller's logs in cable tool holes with open
hole completions of gas in the range from 1,000 to 10,000 mcf per day in the
Blossom sand at 1,950' and in another gas reservoir called the Goodland lime at
2,300'. It is believed that the amount of gas actually produced and transported
off the leases was very small in 1930's because there was no market sale in the
communities at this early date. This gas was used locally only by farmers. There
was no market for sale in large volumes. A early geological publication no. 5116
by the Bureau of Economic Geology at the University of Texas in 1951 reports,
the Magnolia Petroleum Co., #2 Corrie Steele had an initial production rate of
20 million cuft. per day open flow in the Blossom sand in 1921. This well is
located on the TBX Resources leasehold. Similar early completions were made in
1920 in various upper and lower Paluxy gas sands at rates of 6 to 17.5 million
cuft. per day in wells adjacent to the TBX leases is recorded in this
publication. There are 9 recent Blossom sand gas wells from 1980 to 1990 which
have cumulative gas production from 30 to 533 million cuft. of gas for an
average recovery of 130 million cuft. per well and they are still producing.
There is another proven producing gas reservoir known as the Goodland
limestone at a depth of 2,300 feet which surrounds the TBX Resources leases on
the northeast and south borders which produces from a limestone interval 10 to
30 feet thick. Early cable tool driller's logs report significant gas
completions in the 1920 to 1930's . As recent as 1988 to 1994 an offset operator
on the south border of the N.E. Bethany leases has made four gas wells and
another operator on the north border has at least six wells in the Goodland
limestone gas reservoir. Our research shows there are six gas wells which have
made an average of 166 million cuft. of gas per well and are still active wells
in the Goodland limestone.
The lease also has the possibility of some very shallow locations at
990 foot depth in the Nacatoch sand. There are four recent Nacatoch gas wells
completions from 1990 to 1997 which have cumulative production to 37, 61, 190,
220 mmcf of gas to 1-1-1999 for a four well average of 127 mmcf of gas per well.
Most all of the above wells are still active producers, so the cumulatives are
not final. The old reports in the University of Texas publication reports gas
from the Nacatoch sand on the TBX leasehold. This reservoir is a very thick 100
foot sandstone which covers the entire region and has in the past been used as a
water disposal zone by other operators in areas to the north of the TBX
Resources lease but not directly on the 2,336 acres leasehold. The reservoir
pressure is high in the Nacatoch sand adjacent to the lease due to water
injection.
15
<PAGE> 17
GEOLOGICAL DISCUSSION OF GREGG COUNTY EAST TEXAS OIL FIELD LEASES
The three East Texas Field leases are the Roy H. Laird/ Bock 122 lease,
the Prothro lease and the J.T. Florence lease. These leases are small tracts
within the city limits of Kilgore in the famous Woodbine sandstone which extends
over 50 miles in a north-south direction and has an average width of 5 miles
from west to east on the west slope of the Sabine uplift which was discovered in
October 1930 by Dad Joiner. The Woodbine sandstone is marine sand which is
truncated and pinches out updip. The Austin chalk generally, and the Eagle Ford
shale formation in a small area, form the cap-rock against which the Woodbine
sand and its shale members terminate. The westward extent of the production is
determined by the oil-water contact and is generally at about the position of
the -3,320' contour on top of the Woodbine sand. Well logs are not available on
these leases. Modern well logs on these wells and can not now evaluate if the
leases have deeper potentials at this time. Enclosed is a published structural
map drawn on the eroded top surface of the Woodbine Sandstone and a pressures
status map of operations in this famous giant field which show that the TBX
leases in the city of Kilgore is still an active production area. This data came
from the Bureau of Economic Geology publication 5116.
GEOLOGICAL DISCUSSION OF THE MANZIEL FIELD LEASES
The Manziel field is located in north central Wood County about 6 miles
northeast of the county seat of Quitman. Seismic studies between 1934 and
drilling in 1943 into the Sub-Clarksville and Paluxy sands served to localize
the major fault structure on a salt ridge of the Louann salt. The field is
highly faulted in a northeast to southwest direction across the domal structure
and separates multiple oil zones in separate compartments. The Sub-Clarksville
oil sands are lower gravity crude formations with porous to non-porous sand
stringers and shale streaks but a rather uniform thickness. The Paluxy oil sands
are deltaic coastal barrier deposits with high crude gravity which cover a large
part of Wood County and are characterized by a series of alternating sands and
shales and are very continuous over the entire area. The H. H. Noe, J. H.
McElyea, a M. A. Hudson Unit A, Unit B and et al leases have not been evaluated
with detailed geological mapping to determine if there are any future locations
for drilling. These leases produced from the Sub-Clarksville and Paluxy oil
sands now. If this work was done, we may be able to improve our reserves and
find new production.
16
<PAGE> 18
GEOLOGICAL DISCUSSION OF THE QUITMAN FIELD LEASES
TBX leases (namely the Rappe Turner #3, the Rappe Turner #1A, the Rappe
Turner #1, the Plocher-Rappe-Turner #1B, and the Republic Insurance #3 leases)
are located four miles north of Quitman, Texas in the Hazard Anderson survey.
These leases have produced oil from four formations at depths of 4,000 feet in
the Sub-Clarksville sands, the Derr sands at 4,200 feet, the Eagle Ford sand at
4,270 feet and the Paluxy sands at 6,300 feet in separated fault blocks across
an elongated faulted anticline trending to the northeast. The lithology and
fault trapping of the above oil zones are similar to those at the Manziel Field.
A detailed geologic study of the TBX leases have not been done at this time on
this complex large fault controlled oil field. When this work is done, we may be
able to recommend some additional drilling. Maps by other geologists have
recommended future drilling.
GEOLOGICAL DISCUSSION ON THE MERIGALE-PAUL FIELD LEASE
TBX owns a 10 acres lease called the McDade-CurryUnit 1 in the David
Ferguson survey, abstract 205, located about two miles south of Quitman, Texas
in Wood County. This well is currently shut in. The geology of the Merigale-Paul
Field is an elongated fault structure with oil production trapped on the
upthrown side in the upper and lower Sub-Clarksville oil sands at a depth of
4,650 feet by termination of the beds against the faulting.
GEOLOGICAL DISCUSSION ON THE TALCO FIELD LEASES
TBX owns a large 328 acre lease called the Hagansport Unit located
about 7 miles southwest of Talco in Franklin County. The oil is trapped in a
series of thick channel-filled fluvial sandstones 10 to 38 foot thick in the
Stringer, Carr and Galt zones of the Paluxy Formation that have been juxtaposed
by faulting against downthrown limestones and shales of the Washita Group. Oil
sands are located on the upthrown side of the elongated "Talco Fault System"
with a southward dipping monocline. There is a structural closure of 450 feet on
top of the productive sands against the west to east trending fault according to
Publication 5116, Bureau of Economic Geology. Oil from the Paluxy sands are low
gravity crude and the recovery mechanism functioning is solely an imperfect
water drive. At this time TBX has two active wells, twelve shut -in wells and
five injection wells. TBX plans to restore production to more wells in the near
future.
GEOLOGICAL DISCUSSION ON THE MITCHELL CREEK FIELD LEASES
TBX owns about 300 acres in the J. L. Hedrick lease in the D. S.
Westerman and George Halyard surveys, abstracts 105 and 403, located about 8
miles northwest of Mt. Vernon in
17
<PAGE> 19
Hopkins County and about 64 acres in the J. L.Watts lease in the George Halyard
survey, abstract 660, in Franklin County. Seismic work led to the discovery of
this field by Shell Oil Company in 1948. The oil producing zones are the Paluxy
sands which have an average productive thickness of 27 feet per publication 5116
and the to the geology is similar to the Talco field to the east. The Paluxy
sands are made up of a series of alternating sands and shales which are trapped
with closure on the upthrown side of a fault which has been interpreted as a
western extension of the main Talco Fault system to the east. The depth of
production is about 4,600 feet.
GEOLOGICAL DISCUSSION ON THE WINNSBORO, S.E. FIELD LEASE
TBX owns about 52 acres in the J.L.Jacobs lease as a shut in producer
on the William Caison survey located about 3 miles southwest of Winnsboro, Texas
in northern Wood County. The producing formation is the Sub-Clarksville sands
which are trapped with closure against a northeast to southwest trending fault
per mapping by Geomap Company.
B. J. OLIVER, CERTIFIED PETROLEUM GEOLOGIST
Per: B. J. Oliver
---------------------------------------
B. J. Oliver
Certified Petroleum Geologist, #2856
18
<PAGE> 20
[B.J. OLIVER, CERTIFIED PETROLEUM GEOLOGIST LETTERHEAD]
CERTIFICATE OF QUALIFICATIONS
I, B.J. OLIVER, a certified Petroleum Geologist of the city of Dallas, Texas
hereby certify:
1. THAT I am a Certified Petroleum Geologist, in Dallas, Texas and a member of
the American Association of Petroleum Geologist, certified under its Division
of Professional Affairs, certificate #2856. I reside at 10110 Laingtree
Drive, Dallas, Texas 75243; and my office address is 1100 Centennial
Boulevard, Suite 150, Richardson, Texas 75081.
2. THAT I graduated from Oklahoma State University with a Bachelor of Science
degree in May of 1958.
3. THAT I have been employed in the petroleum industry since graduation by
various companies and I am currently a consulting Geologists and have been
directly involved in prospect and project generation and evaluation of both
domestic and international during this time.
4. THAT I participated directly in the evaluation of these properties and
preparation of this geological report for TBX Resources, Inc. dated July 7,
1999. The parameters and conditions employed in this evaluation were examined
by me and adopted as representative and appropriate in establishing the
geological value of these oil and gas properties according the information
available to date.
5. THAT I have not, nor do I expect to receive, any direct or indirect interest
in the properties or securities of TBX Resources, Inc., its participants or
any affiliated thereof.
6. A personal field examination of these properties was considered to be
unnecessary because of the data available from the Geological Library, the
Company's records, and public sources were satisfactory for my purpose.
/s/ B.J. OLIVER
-----------------------------------
B.J. Oliver
Certified Petroleum Geologist #2856
[SEAL]
19
<PAGE> 21
AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS
35 YEARS MEMBERSHIP
TO
BOBBY JOE OLIVER
IN RECOGNITION AND APPRECIATION OF YOUR LOYALTY TO AAPG
1998
[GRAPHIC]
20
<PAGE> 22
[AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS LETTERHEAD]
February 16, 1999
Mr. Bobby Joe Oliver
Revilo Exploration Inc.
1100 Centennial Blvd. #244
Inwood Bank Building
Richardson, TX 75081
Dear Mr. Oliver:
In our busy world it is often easy to neglect the simple things like saying
Thank You.
I want you to know that we do appreciate your being a loyal member of the AAPG
and to congratulate you on reaching this milestone. I hope membership in AAPG
has been, and will continue to be, a rewarding experience. I know you are aware
of many of the services provided by the Association, but there may be some
additional ones of which you may not be aware. I am enclosing a brochure which
highlights benefits and programs. Perhaps one of the more important benefits is
being part of a network of professionals with similar training and career goals.
The Association works hard to fulfill its purposes of advancing the science of
geology, promoting technology, fostering scientific research, and disseminating
geological information -- none of which can be accomplished without members like
you. Display this certificate with pride.
Thank you for continuing AAPG membership.
Sincerely,
/s/ LYLE F. BAIE
Lyle Baie
Executive Director
Enclosures
21
<PAGE> 23
[B. J. OLIVER, CERTIFIED PETROLEUM GEOLOGIST LETTERHEAD]
DECLARATION OF CONSENT AND CONFIDENTIALITY
B. J. Oliver, an independent consultant of petroleum geology, living in
Dallas, Texas has prepared this geological report entitled Location and
Description of Properties owned by TBX Resources, Inc. as of July 7, 1999.
Solely for the use of TBX Resources, Inc., B. J. Oliver knows, as having
prepared the said report, and hereby grants TBX Resources his consent to the use
of his name and the use of the said evaluation.
The said report is the confidential property of TBX Resources, Inc. and
B. J. Oliver, and may not be reproduced, distributed or made available for use
by any other party without the written consent of both TBX Resources, Inc. and
B. J. Oliver.
B. J. OLIVER, CERTIFIED PETROLEUM GEOLOGIST
Per: /s/ B. J. OLIVER
------------------------------
B. J. Oliver
Certified Petroleum Geologist, #2856
[SEAL]
22
<PAGE> 24
TOTAL RESERVES SUMMARY
TBX Resources Package
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY TOTAL RESERVES
TBX RESOURCES PACKAGE
AS OF 07/01/99
<TABLE>
<CAPTION>
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- -------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 35.736 29.403 27.730 22.788 527.838 25.867 117.455 680.850 (296.334) (289.438)
12 2000 108.296 292.811 83.951 226.929 2009.798 108.245 369.842 2822.700 (1290.990) (1119.010)
12 2001 159.992 626.914 123.973 485.858 3357.591 188.265 545.728 1649.000 974.598 767.970
12 2002 164.355 583.029 127.295 451.848 3340.880 185.129 574.775 0.000 2580.976 1848.883
12 2003 147.763 542.217 114.414 420.218 3037.511 168.973 574.775 0.000 2293.763 1493.763
12 2004 132.937 504.261 102.907 390.803 2763.585 154.325 574.775 0.000 2034.485 1204.467
12 2005 119.243 468.963 92.290 363.446 2510.117 140.761 568.910 0.000 1800.445 969.009
12 2006 107.438 436.135 83.133 338.005 2287.068 128.730 568.910 0.000 1589.428 777.671
12 2007 96.379 405.605 74.528 314.344 2077.854 117.460 561.710 0.000 1398.685 622.132
12 2008 86.080 377.212 66.575 292.340 1884.015 107.012 550.010 0.000 1226.994 496.149
12 2009 77.673 350.807 60.057 271.876 1719.450 98.017 550.010 0.000 1071.422 393.856
12 2010 66.468 326.251 51.283 252.844 1521.842 87.603 501.122 0.000 933.117 311.832
12 2011 59.148 303.413 45.652 235.145 1378.980 79.799 489.422 0.000 809.758 246.007
12 2012 50.119 282.174 38.662 218.685 1216.684 71.188 446.237 0.000 699.259 193.125
12 2013 40.312 262.421 31.014 203.376 1044.435 62.199 374.878 0.000 607.358 152.493
- ------- -------- -------- -------- -------- --------- -------- -------- -------- --------- --------
SUBTL 1451.938 5791.617 1123.464 4488.503 30677.650 1723.572 7368.562 5152.550 16432.970 8068.908
AFTER 169.676 1121.121 130.647 868.870 4425.644 264.053 2132.351 0.000 2029.241 385.401
TOTAL 1621.614 6912.738 1254.111 5357.373 35103.290 1987.624 9500.912 5152.550 18462.210 8454.309
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 12857.690 M$ NET PRESENT WORTH AT 10% 8454.309 M$
TOTAL NET LIQ REVENUE 22245.600 M$ 9% 9066.990 M$
12% 7381.364 M$
15% 6078.096 M$
20% 4486.663 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
---------------------- --------------------- -------- -------- --------- --------- ---------
RESERVE CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
---------- ---------- ---------- ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED NON-PRODUCING 621.614 6912.738 1254.111 5357.373 35103.290 11488.540 5152.550 18462.210 8454.309
PROVED NON-PRODUCING 439.610 575.684 339.011 46.155 7007.304 3075.571 797.250 3134.484 1759.278
PROVED UNDEVELOPED 971.735 6337.054 753.094 4911.218 5342.620 187.852 4355.300 3799.470 5735.849
------- -------- -------- -------- --------- --------- -------- --------- --------
TOTAL RESERVES 621.614 6912.738 1254.111 5357.373 35103.290 11488.540 5152.550 18462.210 8454.309
</TABLE>
RESULTS SAVED UNDER: TOTRES
<PAGE> 25
TOTAL PROVED PRODUCING RESERVES SUMMARY
TBX Resources Package
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY TOTAL PROVED PRODUCING RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 13.593 0.000 10.543 0.000 178.728 8.222 46.880 0.000 123.627 120.750
12 2000 24.946 0.000 19.354 0.000 328.210 15.098 93.761 0.000 219.352 190.131
12 2001 22.611 0.000 17.546 0.000 297.691 13.694 93.761 0.000 190.237 149.904
12 2002 20.064 0.000 15.546 0.000 263.500 12.121 87.161 0.000 164.218 117.638
12 2003 18.185 0.000 14.093 0.000 238.968 10.993 87.161 0.000 140.815 91.703
12 2004 16.490 0.000 12.781 0.000 216.826 9.974 87.161 0.000 119.692 70.861
12 2005 14.527 0.000 11.269 0.000 190.929 8.783 81,296 0.000 100.851 54.278
12 2006 13.210 0.000 10.248 0.000 173.753 7.993 81.296 0.000 84.465 41.327
12 2007 11.536 0.000 8.921 0.000 150.942 6.943 74.096 0.000 69.903 31.093
12 2008 10.476 0.000 8.102 0.000 137.149 6.309 74.096 0.000 56.745 22.945
12 2009 9.516 0.000 7.359 0.000 124.655 5.734 74.096 0.000 44.825 16.478
12 2010 4.991 0.000 3.762 0.000 65.072 2.993 25.208 0.000 36.871 12.322
12 2011 4.569 0.000 3.445 0.000 59.639 2.743 25.208 0.000 31.688 9.627
12 2012 4.185 0.000 3.157 0.000 54.684 2.515 25.208 0.000 26.961 7.446
12 2013 3.437 0.000 2.561 0.000 44.180 2.032 19.208 0.000 22.940 5.760
- ------- ------- ----- ------- ----- -------- ------- ------- ----- -------- -------
SUBTL 192.334 0.000 148.688 0.000 2524.926 116.147 975.590 0.000 1433.189 942.262
AFTER 17.935 0.000 13.319 0.000 228.443 10.508 122.868 0.000 95.068 16.920
TOTAL 210.270 0.000 162.006 0.000 2753.369 126.655 1098.458 0.000 1528.257 959.182
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 959.182 M$
TOTAL NET LIQ REVENUE 2753.369 M$ 9% 996.671 M$
12% 892.053 M$
15% 807.384 M$
20% 697.557 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
FIELD NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
---------- ---------- ---------- ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EAST TEXAS FIELD 13.551 0.000 11.336 0.000 204.054 160.886 0.000 43.167 30.290
MITCHELL CREEK & TALCO 140.507 0.000 108.498 0.000 1790.211 736.059 0.000 1054.153 672.062
MANZIEL. QUITMAN & WOOD CO. 56.212 0.000 42.172 0.000 759.104 328.168 0.000 430.936 256.830
------- ----- ------- ----- -------- -------- ----- -------- -------
TTL PROVED PRODUCING RES. 210.270 0.000 162.006 0.000 2753.369 1225.113 0.000 1528.257 959.182
</TABLE>
RESULTS SAVED UNDER: TOTPP
<PAGE> 26
TOTAL PROVED NON-PRODUCING RESERVES SUMMARY
TBX Resources Package
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY TOTAL PROVED NON-PRODUCING RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 22.143 29.403 17.186 22.788 349.110 17.645 70.575 680.850 (419.960) (410.188)
12 2000 48.155 55.673 37.321 43.146 749.544 37.482 173.553 116.400 422.109 365.878
12 2001 50.753 51.776 39.291 40.126 781.694 38.751 198.361 0.000 544.582 429.123
12 2002 45.257 48.151 34.997 37.317 700.977 34.842 198.361 0.000 467.774 335.090
12 2003 40.447 44.781 31.246 34.705 629.935 31.392 198.361 0.000 400.182 260.610
12 2004 36.229 41.646 27.957 32.276 567.256 28.340 198.361 0.000 340.555 201.618
12 2005 32.520 38.731 25.070 30.016 511.823 25.633 198.361 0.000 287.829 154.911
12 2006 29.252 36.020 22.528 27.915 462.681 23.226 198.361 0.000 241.094 117.962
12 2007 26.365 33.498 20.286 25.961 419.017 21.082 198.361 0.000 199.574 88.770
12 2008 22.973 31.153 17.684 24.144 368.998 18.654 186.661 0.000 163.683 66.187
12 2009 20.789 28.972 15.988 22.454 335.403 16.991 186.661 0.000 131.751 48.432
12 2010 18.847 26.944 14.482 20.882 305.360 15.500 186.661 0.000 103.200 34.488
12 2011 16.211 25.058 12.471 19.420 266.370 13.605 174.961 0.000 77.805 23.637
12 2012 11.403 23.304 8.744 18.061 198.796 10.402 131.776 0.000 56.619 15.637
12 2013 5.797 21.673 4.368 16.796 118.927 6.640 66.417 0.000 45.871 11.517
- ------- ------- ------- ------- ------- -------- ------- -------- ------- -------- --------
SUBTL 427.142 536.783 329.619 416.007 6765.892 340.185 2565.787 797.250 3062.670 1743.672
AFTER 12.468 38.901 9.392 30.148 241.412 13.203 156.396 0.000 71.814 15.607
TOTAL 439.610 575.684 339.011 446.155 7007.304 353.388 2722.183 797.250 3134.484 759.278
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 1070.771 M$ NET PRESENT WORTH AT 10% 1759.278 M$
TOTAL NET LIQ REVENUE 5936.533 M$ 9% 1854.212 M$
12% 1588.065 M$
15% 1370.231 M$
20% 1085.698 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
FIELD NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
---------- ---------- ---------- ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BETHANY, N.E. FIELD 124.650 575.684 96.604 446.155 2809.634 1041.022 383.750 1384.863 685.486
MITCHELL CREEK & TALCO 138.048 0.000 110.438 0.000 1822.233 641.961 135.800 1044.473 709.210
MANZIEL QUITMAN WOOD CO. 176.912 0.000 131.969 0.000 2375.437 1392.589 277.700 705.148 364.582
------- ------- ------- ------- -------- -------- ------- -------- -------
TOTAL PROVED
NON-PRODUCING RES. 439.610 575.684 339.011 446.155 7007.304 3075.572 797.250 3134.484 1759.278
</TABLE>
RESULTS SAVED UNDER: TOTNP
<PAGE> 27
TOTAL PROVED UNDEVELOPED RESERVES SUMMARY
TBX Resources Package
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY TOTAL PROVED UNDEVELOPED RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 35.195 237.138 27.276 183.782 932.043 55.665 102.529 2706.300 (1932.451) (1675.018)
12 2001 86.627 575-138 67.136 445.732 2278.206 135.820 253.607 1649.000 239.779 188.943
12 2002 99.034 534.878 76.752 414.531 2376.403 138.166 289.254 0.000 1948.983 1396.155
12 2003 89.131 497.436 69.076 385.513 2168.607 126.588 289.254 0.000 1752.765 1141.450
12 2004 80.218 462.615 62.169 368.527 1979.502 116.011 289.254 0.000 1574.237 931.989
12 2005 72.196 430.232 55.952 333.430 1807.365 106.346 289.254 0.000 1411.765 759.819
12 2006 64.976 400.115 50.357 310.090 1650.634 97.511 289.254 0.000 1263.869 618.382
12 2007 58.479 372.107 45.321 288.383 1507.896 89.435 289.254 0.000 1129.208 502.269
12 2008 52.631 346.059 40.789 268.196 1377.869 82.048 289.254 0.000 1006.567 407.017
12 2009 47.368 321.835 36.710 249.422 1259.392 75.292 289.254 0.000 894.846 328.947
12 2010 42.631 299.306 33.039 231.962 1151.410 69.109 289.254 0.000 793.047 265.023
12 2011 38.368 278.355 29.735 215.725 1052-970 63.451 289.254 0.000 700.265 212.742
12 2012 34.531 258.870 26.762 200.624 963.204 58.271 289.254 0.000 615.680 170.041
12 2013 31.078 240.748 24.085 186.580 881.328 53.527 289.254 0.000 538.547 135.217
- ------- ------- -------- ------- -------- --------- -------- -------- -------- --------- --------
SUBTL 832.462 5254.834 645.158 4072.496 21386.830 1267.240 3827.184 4355.300 11937.110 5382.974
AFTER 139.273 1082.220 107.937 838.722 3955.789 240.341 1853.087 0.000 1862.359 352.875
TOTAL 971.735 6337.054 753.094 4911.218 25342.620 1507.581 5680.271 4355.300 13799.470 5735.849
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 11786.920 M$ NET PRESENT WORTH AT 10% 5735.849 M$
TOTAL NET LIQ REVENUE 13555.700 M$ 9% 6216.108 M$
12% 4901.245 M$
15% 3900.481 M$
20% 2703.408 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
FIELD NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
---------- ---------- ---------- ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BETHANY, N.E. FIELD 971.735 6337.054 753.094 4911.218 25342.620 7187.852 4355.300 13799.470 5735.849
------- -------- ------- -------- --------- -------- -------- --------- --------
TTL PROVED UNDVLPD RES 971.735 6337.054 753.094 4911.218 25342.620 7187.852 4355.300 13799.470 5735.849
</TABLE>
RESULTS SAVED UNDER: TOTPROB
<PAGE> 28
BETHANY, N.E. FIELD
PROVED NON-PRODUCING RESERVES
AND
PROVED UNDEVELOPED RESERVES
<PAGE> 29
BETHANY, N. E. (JENKINS) FIELD
Panola County, Texas
The Bethany Field is comprised of 21 individual tracts containing
approximately 2336 acres. The current producing interval is the Glenrose
(Jenkins, Woolworth and Mooringsport) at about 3600 feet. However, there are
secondary targets in the Nacatoch, Fredricksburg and Paluxy zones. Geologically,
this prospect sits on the eastern flank of the prolific Bethany Structure, in
the northeast part of Panola County, Texas. Crude oil produced from the Jenkins
formation has a specific gravity of 42.
Behind pipe (nonproducing) reserves show the Paluxy zone at a depth of
2600 to 2800 feet, with a varying net pay thickness up to 20-25 feet. The Paluxy
is a gas-bearing zone and is considered to be the primary "behind pipe" target
in this unit. Projected ultimate recovery is approximately 535 MMCF per well.
The Fredricksburg, an oil-bearing zone at a depth of about 2300 feet, is also
present in this unit. It is capable of producing at a rate of 35-40 BOPD per
well upon initial completion. The Nacatoch, at a depth of approximately 1000
feet, is another gas-bearing zone. It has the potential of producing 30-40 MCFD
per well. The Nacatoch is a trapping formation that enhances "gas pockets"
identified by the history of the discovery well in the Bethany Field. This
places this lease in the heart of the zone.
27
<PAGE> 30
PLANNED DEVELOPMENT DRILLING PROGRAMS FOR THE N. E. BETHANY LEASES
PHASE 1:
The first planned drilling program called Phase 1 is to re-work two
existing wells (# 1101 and 2506). We plan to permit a new disposal well using
the existing #2506 wellbore and equip this well for maximum water injection to
be used for all future wells. We plan to re-complete the existing well #1101
which has 7 inch casing and clean out two cement plugs, run cement bond logs,
perforate for a squeeze of cement behind existing casing if necessary, or run a
4 1/2" liner inside 7" casing if required; and cement the formation, perforate
the Paluxy sand as the new gas producer per all analyses and logs, treat the
formation for production, flow and clean up the well, lay a new gas transmission
lines to purchaser and build gas well facilities. The cost of this prospect is
estimated at $267,350.
PHASE 2:*
Our Phase 2 program is to complete the in-field development drilling
program per our geologist's recommendations to develop the reserves we know are
available on the central leases in tracts 10, 11, 20, 22, 25, 28, 30, 31 for the
multiple oil and gas zones in the Nacatoch sand at 990', the Blossom gas sand at
1950', the Goodland lime-gas zone at 2,350', the various Paluxy gas sands at
2,750, 2,900' and 3,550' we see gas productive on existing wells on the tracts
plus the field developmental drilling of the 3 deeper oil reservoirs in the
Upper Glenn Rose members of the Jenkins oil sand at 3,650;, the Woolworth oil
sand at 3,700' and the Mooringsport lime oil and gas zone at 3,850'. It total we
will be drilling for 7 separate oil and gas zones in every well we drill to a
depth of about 3,900 feet. The plan as it stands now is to drill 10 new
developmental oil wells in the Jenkins, Woolworth, Mooringsport reservoirs and 3
new Paluxy gas wells, and up to 14 new gas wells in the shallower Nacatoch,
Blossom, Goodland reservoirs all over the entire lease tracts. At the same time
we will be re-completing the existing wells on the leases beginning with wells
#1104 and 1107. The existing wells have mechanical problems and need new
investment to re-equip.
PHASE 3:
Our Phase 3 program is a continuation of the above existing Phase 2 as
the geological information so dictates. On this 2,336 acres lease, we have the
potential to drill 10 to 15 new in- field development locations on 20 acre
spacing for any of the 7 oil and gas zones present on the lease.
- --------
* Since the compilation of information for this report, no less than 4
additional infield developmental drilling locations have been identified.
28
<PAGE> 31
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): NE Bethany Waterflood Unit #3 Panola County, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
Working Interest 97%
Net revenue interest (before pay out) 75%
Net revenue interest (after pay out) 75%
Royalties payable (overriding royalties) 20%
Gross area of the lease 2,336 acres
Assigned rights (depths, formations) From the surface to 6,449 feet
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 16 (3 water supply wells are included in this total)
Number of wells - gas -0-
Number of producing wells - oil 3 (temporarily off line pending completion of disposal well)
Number of producing wells - gas -0-
Number of shut-in wells - oil 10
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells 1 (currently being re-engineered)
Acreage available for exploration/
Development 1,000 acres or no less than 40 infield developmental drilling
locations
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition December 1, 1997 acquired from Joint Venture
Cost of Acquisition (monetary and non-
monetary) 2,362,710 shares of TBX Resources Stock
Breakdown of cost (monetary and non-
monetary) 2,362,710 shares of TBX Resources Stock
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ----- ---- ---- ----
Net crude oil (bbls) 370 520 69
Net gas (mcf) -0- -0- -0-
Net cash flow from production $1,914.16 $7,263.45 $1,385.29
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- --------
(1) See page 94 for additional information.
29
<PAGE> 32
BETHANY, N. E. FIELD - DEVELOPMENT PROGRAM SUMMARY
Includes Proved Non-Producing and Proved Undeveloped Reserves
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY BETHANY, N.E. FIELD
PLANNED DEVELOPMENT PROGRAM
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- ---------- ---------- ---------- ---------- --------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 29.403 0.000 22.788 54.690 4.102 3.492 267.350 (220.253) (215.128)
12 2000 43.645 292.811 33.825 226.929 1153.476 68.854 141.916 2822.700 (1879.993) (1629.549)
12 2001 102.238 626.914 79.234 485.858 2592.276 153.060 317.801 1649.000 472.415 372.256
12 2002 113.084 583.029 87.640 451.848 2661.955 153.899 353.449 0.000 2154.608 1543.455
12 2003 101.775 542.217 78.876 420.218 2428.291 140.949 353.449 0.000 1933.894 1259.405
12 2004 91.598 504.261 70.988 390.803 2215.716 129.123 353.449 0.000 1733.144 1026.066
12 2005 82.438 468.963 63.889 363.446 2022.281 118.321 353.449 0.000 1550.511 834.493
12 2006 74.194 436.135 57.500 338.005 1846.220 108.451 353.449 0.000 1384.320 677.316
12 2007 66.775 405.605 51.750 314.344 1685.933 99.431 353.449 0.000 1233.053 50.459
12 2008 60.097 377.212 46.575 292.340 1539.972 91.186 353.449 0.000 1095.337 442.912
12 2009 54.087 350.807 41.918 271.876 1407.022 83.646 353.449 0.000 969.928 356.547
12 2010 48.679 326.251 37.726 252.844 1285.894 76.749 353.449 0.000 855.696 285.959
12 2011 43.811 303.413 33.953 235.145 1175.509 70.439 353.449 0.000 751.621 228.344
12 2012 39.430 282.174 30.558 218.685 1074.888 64.665 353.449 0.000 656.774 181.391
12 2013 32-294 262.421 25.028 203.376 938.606 57.331 307.878 0.000 573.397 143.967
- ------- -------- -------- ------- -------- --------- -------- -------- -------- --------- --------
SUBTL 954.145 5791.617 739.462 4488.503 24082.730 1420.205 4659.022 4739.050 13264.450 6055.893
AFTER 142.240 1121.121 110.235 868.870 4069.531 247.672 1901.976 0.000 1919.878 365.442
TOTAL 1096.385 6912.738 849.698 5357.373 28152.260 1667.877 6560.998 4739.050 15184.330 6421.335
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 12857.690 M$ NET PRESENT WORTH AT 10% 6421.335 M$
TOTAL NET LIQ REVENUE 15294.560 M$ 9% 6947.961 M$
12% 5503.988 M$
15% 4399.721 M$
20% 3070.802 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
- -------- ---------- ---------- ---------- ---------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PHASE I (Non-Producing) 0.000 575.684 0.000 446.155 1070.771 195.544 267.350 607.877 233.382
PHASE 2 (Non-Prod & Prvd Undvlp) 631.485 6337.054 489.400 4911.218 20596.130 5974.019 3210.700 11411.410 4936.943
PHASE 3 (Prvd Undvlp) 464.900 0.000 360.297 0.000 6485.354 2059.312 1261.000 3165.041 1251.010
-------- -------- ------- -------- --------- -------- -------- --------- --------
BETHANY. N.E. FIELD 1096.385 6912.738 849.698 5357.373 28152.260 8228.875 4739.050 15184.330 6421.335
</TABLE>
RESULTS SAVED UNDER: BETHALL
<PAGE> 33
BETHANY, N. E. FIELD - PHASE 1 SUMMARY
Includes Proved Non-Producing Reserves
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY BETHANY, N.E. FIELD
PHASE 1
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- --------------------- ---------------------- NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 29.403 0.000 22.788 54.690 4.102 3.492 267.350 (220.253) (215.128)
12 2000 0.000 55.673 0.000 43.146 103.551 7.766 6.984 0.000 88.801 76.971
12 2001 0.000 51.776 0.000 40.126 96.303 7.223 6.984 0.000 82.096 64.690
12 2002 0.000 48.151 0.000 37.317 89.561 6.717 6.984 0.000 75.860 54.342
12 2003 0.000 44.781 0.000 34.705 83.292 6.247 6.984 0.000 70.061 45.626
12 2004 0.000 41.646 0.000 32.276 77.461 5.810 6.984 0.000 64.668 38.285
12 2005 0.000 38.731 0.000 30.016 72.039 5.403 6.984 0.000 59.652 32.105
12 2006 0.000 36.020 0.000 27.915 66.996 5.025 6.984 0.000 54.988 26.904
12 2007 0.000 33.498 0.000 25.961 62.306 4.673 6.984 0.000 50.650 22.529
12 2008 0.000 31.153 0.000 24.144 57.945 4.346 6.984 0.000 46.615 18.849
12 2009 0.000 28.972 0.000 22.454 53.889 4.042 6.984 0.000 42.863 15.757
12 2010 0.000 26.944 0.000 20.882 50.117 3.759 6.984 0.000 39.374 13.158
12 2011 0.000 25.058 0.000 19.420 46.608 3.496 6.984 0.000 36.129 10.976
12 2012 0.000 23.304 0.000 18.061 43.346 3.251 6.984 0.000 33.111 9.145
12 2013 0.000 21.673 0.000 16.796 40.311 3.023 6.984 0.000 30.304 7.609
- ------- ----- ------- ----- ------- -------- ------ ------- ------- ------- -------
SUBTL 0.000 536.783 0.000 416.007 998.416 74.881 101.268 267.350 554.917 221.818
AFTER 0.000 38.901 0.000 30.148 72.355 5.427 13.968 0.000 52.960 11.564
TOTAL 0.000 575.684 0.000 446.155 1070.771 80.308 115.236 267.350 607.877 233.382
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 1070.771 M$ NET PRESENT WORTH AT 10% 233.382 M$
TOTAL NET LIQ REVENUE 0.000 M$ 9% 256.967 M$
12% 191.816 M$
15% 140.814 M$
20% 77.552 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
--------------------- ---------------------- NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@ 10% YR
- -------- ---------- ---------- ---------- ---------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RE-COMPL.#1101,#2506
(Non-Prod) 0.000 575.684 0.000 446.155 1070.771 195.544 267.350 607.877 233.382 17
---------- ---------- ---------- ---------- --------- -------- --------- --------- -------
BETHANY, N.E. FIELD 0.000 575.684 0.000 446.155 1070.771 195.544 267.350 607.877 233.382
</TABLE>
RESULTS SAVED UNDER: PH1
<PAGE> 34
BETHANY, N. E. FIELD - PHASE 2 SUMMARY
Includes Proved Non-Producing and Proved Undeveloped Reserves
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY BETHANY. N.E. FIELD
PHASE 2
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION
- -------- --------------------- NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 43.645 237.138 33.825 183.782 1049.925 61.088 134.932 2822.700 (1968.794) (1706.520)
12 2001 71.104 575.138 55.106 445.732 2061.658 125.859 260.911 388.000 1286.888 1014.049
12 2002 63.994 534.878 49.595 414.531 1887.584 115.680 260.911 0.000 1510.993 1082.401
12 2003 57.594 497.436 44.635 385.513 1728.670 106.351 260.911 0.000 1361.409 886.587
12 2004 51.835 462.615 40.172 358.527 1583.559 97.797 260.911 0.000 1224.851 725.143
12 2005 46.651 430.232 36.155 333.430 1451.016 89.953 260.911 0.000 1100.152 592.107
12 2006 41.986 400.115 32.539 310.089 1329.921 82.759 260.911 0.000 986.252 482.550
12 2007 37.787 372.107 29.285 288.383 1219.254 76.157 260.911 0.000 882.186 392.394
12 2008 34.009 346.059 26.357 268.196 1118.092 70.099 260.911 0.000 787.082 318.266
12 2009 30.608 321.835 23.721 249.422 1025.592 64.537 260.911 0.000 700.144 257.374
12 2010 27.547 299.306 21.349 231.962 940.991 59.430 260.911 0.000 620.650 207.411
12 2011 24.792 278.355 19.214 215.725 863.592 54.740 260.911 0.000 547.942 166.466
12 2012 22.313 258.869 17.293 200.624 792.765 50.431 260.911 0.000 481.423 132.962
12 2013 16.889 240.748 13.089 186.580 683.395 44.422 215.340 0.000 423.633 106.364
- ------- ------- -------- ------- -------- --------- -------- -------- -------- --------- --------
SUBTL 570.754 5254.834 442.335 4072.496 17736.010 1099.302 3481.199 3210.700 9944.811 4657.555
AFTER 60.730 1082.220 47.066 838.722 2860.116 189.940 1203.576 0.000 1466.601 279.389
TOTAL 631.485 6337.054 489.400 4911.218 20596.130 1289.243 4684.776 3210.700 11411.410 4936.943
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 11786.920 M$ NET PRESENT WORTH AT 10% 4936.943 M$
TOTAL NET LIQ REVENUE 8809.209 M$ 9% 5326.639 M$
12% 4257.541 M$
15% 3438.295 M$
20% 2449.021 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
--------------------- ---------------------- NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@ 10% YR
- -------- ---------- ---------- ---------- ---------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WORKOVER 9 WELLS
(Non-Prod) 87.235 0.000 67.607 0.000 1216.925 629.409 87.300 500.216 296.056 14
WORKOVER #1104,1107
(Non-Prod) 37.415 0.000 28.997 0.000 521.938 216.069 29.100 276.769 156.048 18
DRILL 3 PALUXY WELLS
(Prvd Undvlp) 0.000 1295.288 0.000 1003.848 2409.235 528.147 291.000 1590.089 717.719 18
DRILL 10 DEVEL.WELLS
(Prvd Undvlp) 506.835 0.000 392.797 0.000 7070.345 1839.406 1261.000 3969.939 1806.832 20
DRILL 14 GAS WELLS
(Prvd Undvlp) 0.000 3288.137 0.000 2548.307 6115.933 2041.444 1154.300 2920.191 1028.519 23
DRILL 4 PALUXY WELLS
(Prvd Undvlp) 0.000 1753.629 0.000 1359.063 3261.751 719.543 388.000 2154.207 931.769 19
------- -------- ------- -------- --------- -------- -------- --------- --------
BETHANY, N. E. FIELD 631.485 6337.054 489.400 4911.218 20596.130 5974.018 3210.700 11411.410 4936.943
</TABLE>
<PAGE> 35
BETHANY, N. E. FIELD - PHASE 3 SUMMARY
Includes Proved Undeveloped Reserves
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY BETHANY, N.E. FIELD
PHASE 3
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- --------------------- ---------------------- NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
12 2001 31.134 0.000 24.129 0.000 434.316 19.979 49.907 1261.000 (896.569) (706.484)
12 2002 49.090 0.000 38.046 0.000 684.810 31.501 85.554 0.000 567.755 406.711
12 2003 44.181 0.000 34.240 0.0(0 616.329 28.351 85.554 0.000 502.423 327.192
12 2004 39.763 0.000 30.816 0.000 554.696 25.516 85.554 0.000 443.626 262.638
12 2005 35.787 0.000 27.735 0.000 499.226 22.964 85.554 0.000 390.707 210.281
12 2006 32.208 0.000 24.961 0.000 449.303 20.668 85.554 0.000 343.081 167.862
12 2007 28.987 0.000 22.465 0.000 404.372 18.601 85.554 0.000 300.217 133.536
12 2008 26.089 0.000 20.219 0.000 363.935 16.741 85.554 0.000 261.640 105.797
12 2009 23.480 0.000 18.197 0.000 327.541 15.067 $5.554 0.000 226.920 83.416
12 2010 21.132 0.000 16.377 0.000 294.787 13.560 85.554 0.000 195.673 65.391
12 2011 19.019 0.000 14.739 0.000 265.308 12.204 85.554 0.000 167.550 50.902
12 2012 17.117 0.000 13.265 0.000 238.777 10.984 85.554 0.000 142.240 39.284
12 2013 15.405 0.000 11.939 0.000 214.900 9.885 85.554 0.000 119.460 29.994
- ------- ------- ----- ------- ----- -------- ------- -------- -------- -------- --------
SUBTL 383.391 0.000 297.128 0.000 5348.299 246.022 1076.555 1261.000 2764.723 1176.520
AFTER 81.509 0.000 63.170 0.000 1137.055 52.304 684.431 0.000 400.318 74.490
TOTAL 464.900 0.000 360.297 0.000 6485.354 298.326 1760.986 1261.000 3165.041 1251.010
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 1251.010 M$
TOTAL NET LIQ REVENUE 6485.354 MS 9% 1364.355 M$
12% 1054.631 M$
15% 820.611 M$
20% 544.229 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
--------------------- ---------------------- NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
FIELD NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@ 10%
- ---------- ---------- ---------- ---------- ---------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DRILL 10 DEVEL.WELLS
(PRVD UNDVLP) 464.900 0.000 360.297 0.000 6485.354 2059.312 1261.000 3165.041 1251.010
------- ----- ------- ----- -------- -------- -------- -------- --------
BETHANY. N.E. FIELD 464.900 0.000 360.297 0.000 6485.354 2059.312 1261.000 3165.041 1251.010
</TABLE>
RESULTS SAVED UNDER: PH3
<PAGE> 36
BETHANY, N. E. FIELD
SUMMARIZED BY RESERVE CATEGORIES
PROVED NON-PRODUCING RESERVES
AND
PROVED UNDEVELOPED RESERVES
34
<PAGE> 37
BETHANY, N. E. FIELD
Total Reserves Summary
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY BETHANY, N.E. FIELD
TOTAL RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- --------------------- ----------------------- NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 29.403 0.000 22.788 54.690 4.102 3.492 267.350 (220.253) (215.128)
12 2000 43.645 292.811 33.825 226.929 1153.477 68.854 141.916 2822.700 (1879.993) (1629.549)
12 2001 102.238 626.914 79.234 485.858 2592.276 153.060 317.801 1649.000 472.415 372.256
12 2002 113.084 583.029 87.640 451.848 2661.955 153.899 353.449 0.000 2154.608 1543.455
12 2003 101.775 542.217 78.876 420.218 2428.291 140.949 353.449 0.000 1933.893 1259.406
12 2004 91.598 504.261 70.988 390.803 2215.716 129.123 353.449 0.000 1733.144 1026.066
12 2005 82.438 468.963 63.889 363.446 2022.281 118.321 353.449 0.000 1550.511 834.493
12 2006 74.194 436.135 57.500 338.005 1846.220 108.451 353.449 0.000 1384.320 677.316
12 2007 66.775 405.605 51.750 314.344 1685.933 99.431 353.449 0.000 1233.054 548.459
12 2008 60.097 377.212 46.575 292.340 1539.971 91.186 353.449 0.000 1095.338 442.912
12 2009 54.087 350.807 41.918 271.876 1407.022 83.646 353.449 0.000 969.928 356.547
12 2010 48.679 326.251 37.726 252.844 1285.894 76.749 353.449 0.000 855.696 285.959
12 2011 43.811 303.413 33.953 235.145 1175.509 70.439 353.449 0.000 751.621 228.344
12 2012 39.430 282.174 30.558 218.685 1074.888 64.665 353.449 0.000 656.774 181.391
12 2013 32.294 262.421 25.028 203.376 938.606 57.331 307.878 0.000 573.397 143.967
- ------- ------- -------- ------- -------- --------- -------- -------- -------- --------- --------
SUBTL 954.145 5791.617 739.462 4488.503 24082.730 1420.205 4659.023 4739.050 13264.460 6055.893
AFTER 142.240 1121.121 110.235 868.870 4069.624 247.671 1901.975 0.000 1919.878 365.443
TOTAL 1096.385 6912.738 849.698 5357.373 28152.260 1667.877 6560.997 4739.050 15184.330 6421.335
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 12857.690 M$ NET PRESENT WORTH AT 10% 6421.335 M$
TOTAL NET LIQ REVENUE 15294.560 M$ 9% 6947.961 M$
12% 5503.989 M$
15% 4399.721 M$
20% 3070.802 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
---------------------- --------------------- NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
RESERVE CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
- ---------------- ---------- ---------- ---------- ---------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED NON-PRODUCING 124.650 575.684 96.604 446.155 2809.634 1041.022 383.750 1384.863 685.486
PROVED UNDEVELOPED 971.735 6337.054 753.094 4911.218 25342.620 7187.852 4355.300 13799.470 5735.849
-------- -------- ------- -------- --------- -------- -------- --------- --------
BETHANY, N.E. FIELD 1096.385 6912.738 849.698 5357.373 28152.260 8228.874 4739.050 15184.330 6421.335
</TABLE>
RESULTS SAVED UNDER: BETHTOT
<PAGE> 38
BETHANY, N. E. FIELD
PROVED NON-PRODUCING RESERVES
36
<PAGE> 39
BETHANY, N. E. FIELD
Total Non-Producing Reserves Summary
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY BETHANY, N.E. FIELD
TOTAL PROVED NON-PRODUCING RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- ---------------------- ---------------------- NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- --- ---- ---------- ---------- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 29.403 0.000 22.788 54.690 4.102 3.492 267.350 (220.253) (215.128)
12 2000 8.450 55.673 6.549 43.146 221.433 13.189 39.387 116.400 52.458 45.469
12 2001 15.611 51.776 12.098 40.126 314.070 17.240 64.195 0.000 232.636 183.314
12 2002 14.050 48.151 10.888 37.317 285.552 15.733 64.195 0.000 205.625 147.299
12 2003 12.645 44.781 9.800 34.705 259.684 14.361 64.195 0.000 181.128 117.956
12 2004 11.380 41.646 8.820 32.276 236.214 13.112 64.195 0.000 158.907 94.077
12 2005 10.242 38.731 7.938 30.016 214.916 11.975 64.195 0.000 138.746 74.674
12 2006 9.218 36.020 7.144 27.915 195.586 10.940 64.195 0.000 120.451 58.934
12 2007 8.296 33.498 6.429 25.961 178.037 9.997 64.195 0.000 103.846 46.190
12 2008 7.466 31.153 5.787 24.144 162.102 9.137 64.195 0.000 88.770 35.895
12 2009 6.720 28.972 5.208 22.454 147.630 8.354 64.195 0.000 75.082 27.600
12 2010 6.048 26.944 4.687 20.882 134.484 7.640 64.195 0.000 62.650 20.936
12 2011 5.443 25.058 4.218 19.420 122.539 6.988 64.195 0.000 51.356 15.602
12 2012 4.899 23.304 3.797 18.061 111.683 6.394 64.195 0.000 41.094 11.350
12 2013 1.216 21.673 0.943 16.796 57.278 3.804 18.624 0.000 34.850 8.750
- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUBTL 121.683 536.783 94.305 416.007 2695.899 152.965 831.838 383.750 1327.345 672.918
AFTER 2.966 38.901 2.299 30.148 113.736 7.330 48.888 0.000 57.518 12.568
TOTAL 124.650 575.684 96.604 446.155 2809.634 160.296 880.726 383.750 1384.863 685.486
TOTAL NET GAS REVENUE 1070.771 M$ NET PRESENT WORTH AT 10% 685.486 M$
TOTAL NET LIQ REVENUE 1738.863 M$ 9% 731.853 M$
12% 602.743 M$
15% 499.240 M$
20% 367.394 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
---------------------- ---------------------- NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
- --------------------- ---------- ---------- ---------- ---------- -------- -------- --------- --------- --------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RE-COMPL.#1101.#2506
(Phase 1) 0.000 575.684 0.000 446.155 1070.771 195.544 267.350 607.877 233.382 17
WORKOVER 9 WELLS
(Phase 2) 87.235 0.000 67.607 0.000 1216.925 629.409 87.300 500.216 296.056 14
WORKOVER #1104 & 1107
(Phase 2) 37.415 0.000 28.997 0.000 521.938 216.069 29.100 276.769 156.048 18
- --------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
BETHANY. N.E. FIELD 124.650 575.684 96.604 446.155 2809.634 1041.022 383.750 1384.863 685.486
</TABLE>
RESULTS SAVED UNDER: BETHNP
<PAGE> 40
RE-COMPLETE WELL #1101 INTO PALUXY FORMATION AND
CONVERT WELL #2506 TO SALT WATER DISPOSAL
Proved Non-Producing Reserves - Phase 1
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. WELL #1101 (Re-compl)-WELL #2506 (Co
PROVED NON-PRODUCING RESERVES BETHANY, N.E. FIELD
PANOLA COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- ---------------------- ---------------------- OIL GAS NET OPER SEVR.AND NET OPER
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE
- --- ---- ---------- ---------- ---------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT
12 1999 0.000 29.403 0.000 22.788 0.00 2.40 54.690 4.102 3.492
12 2000 0.000 55.673 0.000 43.146 0.00 2.40 103.551 7.766 6.984
12 2001 0.000 51.776 0.000 40.126 0.00 2.40 96.303 7.223 6.984
12 2002 0.000 48.151 0.000 37.317 0.00 2.40 89.561 6.717 6.984
12 2003 0.000 44.781 0.000 34.705 0.00 2.40 83.292 6.247 6.984
12 2004 0.000 41.646 0.000 32.276 0.00 2.40 77.461 5.810 6.984
12 2005 0.000 38.731 0.000 30.016 0.00 2.40 72.039 5.403 6.984
12 2006 0.000 36.020 0.000 27.915 0.00 2.40 66.996 5.025 6.984
12 2007 0.000 33.498 0.000 25.961 0.00 2.40 62.306 4.673 6.984
12 2008 0.000 31.153 0.000 24.144 0.00 2.40 57.945 4.346 6.984
12 2009 0.000 28.972 0.000 22.454 0.00 2.40 53.889 4.042 6.984
12 2010 0.000 26.944 0.000 20.882 0.00 2.40 50.117 3.759 6.984
12 2011 0.000 25.058 0.000 19.420 0.00 2.40 46.608 3.496 6.984
12 2012 0.000 23.304 0.000 18.061 0.00 2.40 43.346 3.251 6.984
12 2013 0.000 21.673 0.000 16.796 0.00 2.40 40.311 3.023 6.984
- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUBTL 0.000 536.783 0.000 416.007 998.416 74.881 101.268
AFTER 0.000 38.901 0.000 30.148 72.355 5.427 13.968
TOTAL 0.000 575.683 0.000 446.155 0.00 2.40 1070.771 80.308 115.236
<CAPTION>
YEAR END
- -------- TOTAL CASH FLOW DISC CASH
MO. YEAR INVST(M$) (M$) FLOW@1O%
- --- ---- -------- --------- ---------
<C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 267.350 (220.253) (215.128)
12 2000 0.000 88.801 76.971
12 2001 0.000 82.096 64.690
12 2002 0.000 75.860 54.342
12 2003 0.000 70.061 45.626
12 2004 0.000 64.668 38.285
12 2005 0.000 59.652 32.105
12 2006 0.000 54.988 26.904
12 2007 0.000 50.650 22.529
12 2008 0.000 46.615 18.849
12 2009 0.000 42.863 15.757
12 2010 0.000 39.374 13.158
12 2011 0.000 36.129 10.976
12 2012 0.000 33.111 9.145
12 2013 0.000 30.304 7.609
- -------- -------- -------- --------
SUBTL 267.350 554.917 221.828
AFTER 0.000 52.960 11.564
TOTAL 267.350 607.877 233.382
INITIAL WORKING INTEREST 97.000000% NET PRESENT VALUE AT 10% 233.382
INITIAL NET GAS INTEREST 77.500000% 9% 256.967
INITIAL NET OIL INTEREST 77.500000% 12% 191.816
15% 140.814
FINAL WORKING INTEREST 97.000000% 20% 77.552
FINAL NET GAS INTEREST 77.500000%
FINAL NET OIL INTEREST 77.500000% TOTAL GAS REVENUE 1070.771
TOTAL OIL REVENUE 0.000
</TABLE>
FILE NAME: BETH1-1
REMAINING LIFE OF PROJECT IS 17 YEARS
DIRECTORY: TEXEAST
<PAGE> 41
WORKOVER WELLS #1104 AND #1107 IN 7/1/2000
Proved Non-Producing Reserves - Part of Phase 2
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. WELL #1104 & #1107 (Workover 7/1/2000)
PROVED NON-PRODUCING RESERVES BETHANY. N.E. FIELD
PANOLA COUNTY. TEXAS
GULFTEX, INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- ---------------------- ---------------------- OIL GAS NET OPER SEVR.AND NET OPER
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE
- --- ---- ---------- ---------- ---------- ---------- -------- -------- -------- -------- --------
INITIAL INVESTMENT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000
12 2000 2.331 0.000 1.807 0.000 18.00 0.00 32.519 1.496 5.820
12 2001 4.306 0.000 3.337 0.000 18.00 0.00 60.074 2.763 11.640
12 2002 3.876 0.000 3.004 0.000 18.00 0.00 54.066 2.487 11.640
12 2003 3.488 0.000 2.703 0.000 18.00 0.00 48.660 2.238 11.640
12 2004 3.139 0.000 2.433 0.000 18.00 0.00 43.794 2.015 11.640
12 2005 2.825 0.000 2.190 0.000 18.00 0.00 39.414 1.813 11.640
12 2006 2.543 0.000 1.971 0.000 18.00 0.00 35.473 1.632 11.640
12 2007 2.289 0.000 1.774 0.000 18.00 0.00 31.926 1.469 11.640
12 2008 2.060 0.000 1.596 0.000 18.00 0.00 28.733 1.322 11.640
12 2009 1.854 0.000 1.437 0.000 18.00 0.00 25.860 1.190 11.640
12 2010 1.668 0.000 1.293 0.000 18.00 0.00 23.274 1.071 11.640
12 2011 1.502 0.000 1.164 0.000 18.00 0.00 20.946 0.964 11.640
12 2012 1.351 0.000 1.047 0.000 18.00 0.00 18.852 0.867 11.640
12 2013 1.216 0.000 0.943 0.000 18.00 0.00 16.967 0.780 11.640
- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUBTL 34.449 0.000 26.698 0.000 480.557 22.106 157.140
AFTER 2.966 0.000 2.299 0.000 41.381 1.904 34.920
TOTAL 37.415 0.000 28.997 0.000 18.00 0.00 521.938 24.009 192.060
<CAPTION>
YEAR END
- -------- TOTAL CASH FLOW DISC CASH
MO. YEAR INVST(M$) (M$) FLOW@10%
- --- ---- --------- --------- ---------
<S> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.00
12 2000 29.100 (3.897) (3.378)
12 2001 0.000 45.670 35.988
12 2002 0.000 39.939 28.611
12 2003 0.000 34.781 22.651
12 2004 0.000 30.139 17.843
12 2005 0.000 25.961 13.973
12 2006 0.000 22.201 10.863
12 2007 0.000 18.817 8.370
12 2008 0.000 15.771 6.377
12 2009 0.000 13.030 4.790
12 2010 0.000 10.563 3.530
12 2011 0.000 8.343 2.535
12 2012 0.000 6.345 1.752
12 2013 0.000 4.546 1.141
- -------- -------- -------- --------
SUBTL 29.100 272.211 155.0
AFTER 0.000 4.558 1.0
TOTAL 29.100 276.769 156.0
INITIAL WORKING INTEREST 97.000000% NET PRESENT VALUE AT 10% 156.048
INITIAL NET GAS INTEREST 77.500000% 9% 164.237
INITIAL NET OIL INTEREST 77.500000% 12% 141.360
15% 122.846
FINAL WORKING INTEREST 97.000000% 20% 99.025
FINAL NET GAS INTEREST 77.500000%
FINAL NET OIL INTEREST 77.500000% TOTAL GAS REVENUE 0.000
TOTAL OIL REVENUE 521.938
</TABLE>
FILE NAME: BETH1-2
REMAINING LIFE OF PROJECT IS 18 YEARS DIRECTORY: TEXEAST
<PAGE> 42
WORKOVER 9 WELLS
Proved Non-Producing Reserves - Part of Phase 2
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. 9 SHUT-IN WELLS - WORKOVER (6/l/2000
PROVED NON-PRODUCING RESERVES BETHANY, N.E. (JENKINS) FIELD
PANOLA COUNTY. TEXAS
GULFTEX. INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION
- -------- ---------------------- ---------------------- OIL GAS NET OPER SEVR.AND NET OPER
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE
- --- ---- ---------- ---------- ---------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000
12 2000 6.119 0.000 4.742 0.000 18.00 0.00 85.363 3.927 26.583
12 2001 11.304 0.000 8.761 0.000 18.00 0.00 157.694 7.254 45.571
12 2002 10.174 0.000 7.885 0.000 18.00 0.00 141.924 6.529 45.571
12 2003 9.156 0.000 7.096 0.000 18.00 0.00 127.732 5.876 45.571
12 2004 8.241 0.000 6.387 0.000 18.00 0.00 114.959 5.288 45.571
12 2005 7.417 0.000 5.748 0.000 18.00 0.00 103.463 4.759 45.571
12 2006 6.675 0.000 5.173 0.000 18.00 0.00 93.116 4.283 45.571
12 2007 6.008 0.000 4.656 0.000 18.00 0.00 83.805 3.855 45.571
12 2008 5.407 0.000 4.190 0.000 18.00 0.00 75.424 3.470 45.571
12 2009 4.866 0.000 3.771 0.000 18.00 0.00 67.882 3.123 45.571
12 2010 4.379 0.000 3.394 0.000 18.00 0.00 61.094 2.810 45.571
12 2011 3.942 0.000 3.055 0.000 18.00 0.00 54.984 2.529 45.571
12 2012 3.547 0.000 2.749 0.000 18.00 0.00 49.486 2.276 45.571
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000
- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUBTL 87.235 0.000 67.607 0.000 1216.925 55.979 573.430
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 87.235 0.000 67.60 0.000 18.00 0.00 1216.925 55.979 573.430
<CAPTION>
YEAR END
- -------- TOTAL CASH FLOW DISC CASH
MO. YEAR INVST(M$) (M$) FLOW@10%
- --- ---- --------- --------- ---------
<S> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.0
12 2000 87.300 (32.447) (28. )
12 2001 0.000 104.869 82.63
12 2002 0.000 89.825 64.3
12 2003 0.000 76.286 49.6
12 2004 0.000 64.100 37.9
12 2005 0.000 53.133 28.59
12 2006 0.000 43.262 21.1
12 2007 0.000 34.379 15.2
12 2008 0.000 26.384 10.6
12 2009 0.000 19.189 7.0
12 2010 0.000 12.713 4.2
12 2011 0.000 6.884 2.0
12 2012 0.000 1.639 0.4
12 2013 0.000 0.000 0.0
- -------- -------- -------- --------
SUBTL 87.300 500.216 296.0
AFTER 0.000 0.000 0.0
TOTAL 87.300 500.216 296.0
INITIAL WORKING INTEREST 97.000000% NET PRESENT VALUE AT 10% 296.056 M$
INITIAL NET GAS INTEREST 77.500000% 9% 310.649 M$
INITIAL NET OIL INTEREST 77.500000% 12% 269.567 M$
15% 235.580 M$
FINAL WORKING INTEREST 97.000000% 20% 190.818 M$
FINAL NET GAS INTEREST 77.500000%
FINAL NET OIL INTEREST 77.500000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 1216.925 M$
</TABLE>
FILE NAME: BETH2-1
REMAINING LIFE OF PROJECT IS 14 YEARS
DIRECTORY: TEXEAST
<PAGE> 43
BETHANY, N. E. FIELD
PROVED UNDEVELOPED RESERVES
41
<PAGE> 44
BETHANY, N. E. FIELD
Total Proved Undeveloped Reserves Summary
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
SUMMARY BETHANY. N.E. FIELD
TOTAL PROVED UNDEVELOPED RESERVES
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- ------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 35.195 237.138 27.276 183.782 932.043 55.665 102.529 2706.300 (1932.451) (1675.018)
12 2001 86.627 575.138 67.136 445.732 2278.206 135.820 253.607 1649.000 239.779 188.943
12 2002 99.034 534.878 76.752 414.531 2376.403 138.166 289.254 0.000 1948.983 1396.155
12 2003 89.131 497.436 69.076 385.513 2168.607 126.588 289.254 0.000 1752.765 1141.450
12 2004 80.218 462.615 62.169 358.527 1979.502 116.011 289.254 0.000 1574.237 931.989
12 2005 72.196 430.232 55.952 333.430 1807.365 106.345 289.254 0.000 1411.765 759.819
12 2006 64.976 400.115 50.357 310.089 1650.634 97.511 289.254 0.000 1263.869 618.382
12 2007 58.479 372.107 45.321 288.383 1507.896 89.435 289.254 0.000 112~.208 502.269
12 2008 52.631 346.059 40.789 268.196 1377.869 82.048 289.254 0.000 1006.567 407.017
12 2009 47.368 321.835 36.710 249.422 1259.392 75.292 289.254 0.000 894.846 328.946
12 2010 42.631 299.306 33.039 231.962 1151.410 69.109 289.254 0.000 793.047 265.023
12 2011 38.368 278.355 29.735 215.725 1052.970 63.461 289.254 0.000 700.265 212.742
12 2012 34.531 258.869 26.762 200.624 963.204 58.271 289.254 0.000 615.680 170.041
12 2013 31.078 240.748 24.085 186.580 881.328 53.527 289.254 0.000 538.547 135.217
- ------- ------ ------- ------ ------- -------- ------- ------- ----- ------- -------
SUBTL 832.462 5254.834 645.158 4072.496 21386.830 1267.240 3827.184 4355.300 11937.110 5382.974
AFTER 139.273 1082.220 107.936 838.722 3955.790 240.341 1853.087 0.000 1862.361 352.875
TOTAL 971.735 6337.054 753.094 4911.218 25342.620 1507.581 5680.271 4355.300 13799.470 5735.849
TOTAL NET GAS REVENUE 11786.920 M$ NET PRESENT WORTH AT 10% 5735.849 M$
TOTAL NET LIQ REVENUE 13555.700 M$ 9% 6216.108 M$
12% 4901.245 M$
15% 3900.481 M$
20% 2703.408 M$
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
- ----------------------- ---------- ---------- ---------- ---------- ------- ------- --------- --------- --------- --
3 PALUXY WELLS
(Phase 2) 0.000 1295.288 0.000 1003.848 2409.235 528.147 291.000 1590.089 717.719 18
10 DEVELOPMENT WELLS
(Phase 2) 506.835 0.000 392.797 0.000 7070.345 1839.406 1261.000 3969.939 1806.832 20
14 DEVEL. GAS WELLS
(Phase 2) 0.000 3288.137 0.000 2548.307 6115.933 2041.444 1154.300 2920.191 1028.519 23
4 PALUXY WELLS
(Phase 2) 0.000 1753.629 0.000 1359.063 3261.751 719.543 388.000 2154.207 931.769 19
10 DEVELOPMENT WELLS
(Phase 3) 464.900 0.000 360.297 0.000 6485.354 2059.312 1261.000 3165.041 1251.010 23
- ------- -------- ------- -------- -------- -------- -------- -------- -------- --
BETHANY. N.E. FIELD 971.735 6337.054 753.094 4911.218 25342.620 7187.853 4355.300 13799.470 5735.849
RESULTS SAVED UNDER: BETHPROB
</TABLE>
<PAGE> 45
Drill 3 Paluxy Development Wells (Tract .25)
PROVED UNDEVELOPED RESERVES - PART OF PHASE 2
OIL AM GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
MEAST OPERATING CO. 3 PALUXY DEVEL. WELLS Tr. 25 (6/1/2000)
PROVED UNDEVELOPED RESERVES BETHANY, N.E. FIELD
PANOLA COUNTY. TEXAS
GULFTEX, INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 0.000 66.158 0.000 51.272 0.00 2.40 123.053 9.229 12.222 291.000 (189.398) (164.167)
12 2001 0.000 125.264 0.000 97.079 0.00 2.40 232.990 17.474 20.952 0.000 194.564 153.314
12 2002 0.000 116.495 0.000 90.284 0.00 2.40 216.681 16.251 20.952 0.000 179.478 128.569
12 2003 0.000 108.340 0.000 83.964 0.00 2.40 201.513 15.113 20.952 0.000 165.447 107.744
12 2004 0.000 100.756 0.000 78.086 0.00 2.40 187.407 14.056 20.952 0.000 152.399 90.224
12 2005 0.000 93.703 0.000 72.620 0.00 2.40 174.288 13.072 20.952 0.000 140.265 75.491
12 2006 0.000 87.144 0.000 67.537 0.00 2.40 162.088 12.157 20.952 0.000 128.979 63.107
12 2007 0.000 81.044 0.000 62.809 0.00 2.40 150.742 11.306 20.952 0.000 118.484 52.701
12 2008 0.000 75.371 0.000 58.412 0.00 2.40 140.190 10-514 20.952 0.000 108.723 43.964
12 2009 0.000 70.095 0.000 54.323 0.00 2.40 130.376 9.778 20.952 0.000 99.646 36.630
12 2010 0.000 65.188 0.000 50.521 0.00 2.40 121.250 9.094 20.952 0.000 91.204 30.479
12 2011 0.000 60.625 0.000 46.984 0.00 2.40 112.762 8.457 20.952 0.000 83.353 25.323
12 2012 0.000 56.381 0.000 43.695 0.00 2.40 104.869 7.865 20.952 0.000 76.052 21.004
12 2013 0.000 52.434 0.000 40.637 0.00 2.40 97.528 7.315 20.952 0.000 69.261 17.310
- ------- ----- ------- ----- ------ ---- ---- ------- ------ ------ ------- ------- -------
SUBTL 0.000 1158.998 0.000 898.223 2155.736 161.680 284.598 291.000 1418.458 681.772
AFTER 0.000 136.290 0.000 105.625 253.500 19.012 62.856 0.000 171.631 35.946
TOTAL 0.000 1295.288 0.000 1003.848 0.00 2.40 2409.235 180.693 347.454 291.000 1590.089 717.719
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 717.719
INITIAL NET GAS INTEREST 77.500000 % 9% 770.808
INITIAL NET OIL INTEREST 77.500000 % 12% 625.022
15% 513.027
FINAL WORKING INTEREST 97.000000 % 20% 377.468
FINAL NET GAS INTEREST 77.500000 %
FINAL NET OIL INTEREST 77.500000 % TOTAL GAS REVENUE 2409.235
TOTAL OIL REVENUE 0.000
</TABLE>
FILE NAME: BETH2-2
REMAINING LIFE OF PROJECT IS 18 YEARS
DIRECTORY: TEXEAST
<PAGE> 46
DRILL 10 DEVELOPMENT WELLS
Proved Undeveloped Reserves - Part of Phase 2
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. 10 WELL DEVELOPMENT PROGRAM (6/1/2000)
PROVED UNDEVELOPED RESERVES BETHANY.N.E.(JENKINS-WOOLWORTH-MOOR
PANOLA COUNTY, TEXAS
GULFTEX. INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 1O%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.00
12 2000 35.195 0.000 27.276 0.000 18.00 0.00 490.966 22.584 47.530 1261.000 (840.149) (728.228)
12 2001 55.493 0.000 43.007 0.000 18.00 0.00 774.133 35.610 81.480 0.000 657.043 517.740
12 2002 49.944 0.000 38.707 0.000 18.00 0.00 696.719 32.049 81.480 0.000 583.190 417.769
12 2003 44.950 0.000 34.836 0.000 18.00 0.00 627.047 28.844 81.480 0.000 516.723 336.504
12 2004 40.455 0.000 31.352 0.000 18.00 0.00 564.342 25.960 81.480 0.000 456.902 270.498
12 2005 36.409 0.000 28.217 0.000 18.00 0.00 507.908 23.364 81.480 0.000 403.064 216.931
12 2006 32.768 0.000 25.395 0.000 18.00 0.00 457.117 21.027 81.480 0.000 354.609 173.502
12 2007 29.491 0.000 22.856 0.000 18.00 0.00 411.405 18.925 81.480 0.000 311.000 138.332
12 2008 26.542 0.000 20.570 0.000 18.00 0.00 370.264 17.032 81.480 0.000 271.752 109.886
12 2009 23.888 0.000 18.513 0.000 18.00 0.00 333.238 15.329 81.480 0.000 236.429 86.911
12 2010 21.499 0.000 16.662 0.000 18.00 0.00 299.914 13.796 81.480 0.000 204.638 68.386
12 2011 19.349 0.000 14.996 0.000 18.00 0.00 269.922 12.416 81.480 0.000 176.026 53.477
12 2012 17.414 0.000 13.496 0.000 18.00 0.00 242.930 11.175 81.480 0.000 150.275 41.504
12 2013 15.673 0.000 12.146 0.000 18.00 0.00 218.637 10.057 81.480 0.000 127.099 31.912
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------ ----- ------- ------
SUBTL 449.071 0.000 348.030 0.000 6264.540 288.169 1106.770 1261.000 3608.601 1735.125
AFTER 57.764 0.000 44.767 0.000 805.805 37.067 407.400 0.000 361.337 71.706
TOTAL 506.835 0.000 392.797 0.000 18.00 0.00 7070.345 325.236 1514.170 1261.000 3969.939 1806.832
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 1806.832 M%
INITIAL NET GAS INTEREST 77.500000 % 9% 1941.768 M%
INITIAL NET OIL INTEREST 77.500000 % 12% 1569.687 M%
15% 1280.211 M%
FINAL WORKING INTEREST 97.000000 % 20% 924.749 M%
FINAL NET GAS INTEREST 77.500000 %
FINAL NET OIL INTEREST 77.500000 % TOTAL GAS REVENUE 0.000 M%
TOTAL OIL REVENUE 7070.345 M%
</TABLE>
FILE NAME: BETH2-3
REMAINING LIFE OF PROJECT IS 20 YEARS
DIRECTORY: TEXEAST
<PAGE> 47
DRILL 14 DEVELOPMENT WELLS
Proved Undeveloped Reserves - Part of Phase 2
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. 14 WELL DEVELOPMENT PROGRAM (6/1/2000)
PROVED UNDEVELOPED RESERVES BETHANY, N.E. (SHALLOW GAS ZONES) FI
PANOLA COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 0.000 170.981 0.000 132-510 0.00 2.40 318.024 23.852 42.777 1154.300 (902.905) (782.624)
12 2001 0.000 276.685 0.000 214.431 0.00 2.40 514.634 38.598 73.332 0.000 402.705 317.325
12 2002 0.000 257.317 0.000 199.421 0.00 2.40 478.609 35.896 73.332 0.000 369.382 264.607
12 2003 0.000 239.305 0.000 185.461 0.00 2.40 445.106 33.383 73.332 0.000 338.391 220.370
12 2004 0.000 222.553 0.000 172.479 0.00 2.40 413.949 31.046 73.332 0.000 309.570 183.274
12 2005 0.000 206.974 0.000 160.405 0.00 2.40 384.972 28.873 73.332 0.000 282.767 152.187
12 2006 0.000 192.486 0.000 149.176 0.00 2.40 358.024 26.852 73.332 0.000 257.840 126.155
12 2007 0.000 179.012 0.000 138.734 0.00 2.40 332.962 24.972 73.332 0.000 234.657 104.375
12 2008 0.000 166.481 0.000 129.023 0.00 2.40 309.654 23.224 73.332 0.000 213.098 86.169
12 2009 0.000 154.827 0.000 119.991 0.00 2.40 287.978 21.598 73.332 0.000 193.048 70.965
12 2010 0.000 143.989 0.000 111.591 0.00 2.40 267.819 20.086 73.332 0.000 174.401 58.282
12 2011 0.000 133.910 0.000 103.780 0.00 2.40 249.072 18.680 73.332 0.000 157.059 47.716
12 2012 0.000 124.536 0.000 96.515 0.00 2.40 231.637 17.373 73.332 0.000 140.932 38.923
12 2013 0.000 115.818 0.000 89.759 0.00 2.40 215.422 16.157 73.332 0.000 125.933 31.619
- ------- ----- ------- ----- ------- ---- ---- ------- ------ ------ -------- ------- -------
SUBTL 0.000 2584.872 0.000 2003.276 4807.861 360.590 996.093 1154.300 2296.879 919.3
AFTER 0.000 703.265 0.000 546.031 1308.072 98.105 586.656 0.000 623.312 109.178
TOTAL 0.000 3288.137 0.000 2548.307 0.00 2.40 6115.933 458.695 1582.749 1154.300 2920.191 1028.5
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 1028.519 M$
INITIAL NET GAS INTEREST 77.500000 % 9% 1135.333 M$
INITIAL NET OIL INTEREST 77.500000 % 12% 844.989 M$
15% 628.655 M$
FINAL WORKING INTEREST 97.000000 % 20% 375.880 M$
FINAL NET GAS INTEREST 77.500000 %
FINAL NET OIL INTEREST 77.500000 % TOTAL GAS REVENUE 6115.933 M$
TOTAL OIL REVENUE 0.000 M$
</TABLE>
FILE NAME: BETH2-4
REMAINING LIFE OF PROJECT IS 23 YEARS
DIRECTORY: TEXEAST
<PAGE> 48
DRILL 4 PALUXY DEVELOPMENT WELLS (TRACT 11)
Proved Undeveloped Reserves - Part of Phase 2
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. 4 PALUXY DEVEL. WELLS Tr. 11 (1/1/2001)
PROVED UNDEVELOPED RESERVES BETHANY, N.E. FIELD
PANOLA COUNTY. TEXAS
GULFTEX , INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 1O%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.00
12 2000 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.00
12 2001 0.000 173.190 0.000 134.222 0.00 2.40 322.133 24.160 27.936 388.000 (117.963) (92.953)
12 2002 0.000 161.066 0.000 124.826 0.00 2.40 299.583 22.469 27.936 0.000 249.179 178.499
12 2003 0.000 149.792 0.000 116.088 0.00 2.40 278.612 20.896 27.936 0.000 229.780 149.639
12 2004 0.000 139.306 0.000 107.962 0.00 2.40 259.109 19.433 27.936 0.000 211.740 125.355
12 2005 0.000 129.555 0.000 100.405 0.00 2.40 240.971 18.073 27.936 0.000 194.963 104.930
12 2006 0.000 120.486 0.000 93.376 0.00 2.40 224.103 16.808 27.936 0.000 179.359 87.757
12 2007 0,000 112.052 0.000 86.840 0.00 2.40 208.416 15.631 27.936 0.000 164.849 73.324
12 2008 0.000 104.208 0.000 80.761 0.00 2.40 193.827 14.537 27.936 0.000 151.354 61.202
12 2009 0.000 96.913 0.000 75.108 0.00 2.40 180.259 13.519 27.936 0.000 138.803 51.024
12 2010 0.000 90.129 0.000 69.850 0.00 2.40 167.640 12.573 27.936 0.000 127.131 42.485
12 2011 0.000 83.820 0.000 64.961 0.00 2.40 155.905 11.693 27.936 0.000 116.276 35.325
12 2012 0.000 77.953 0.000 60.413 0.00 2.40 144.992 10.874 27.936 0.000 106.181 29.326
12 2013 0.000 72.496 0.000 56.184 0.00 2.40 134.842 10.113 27.936 0.000 96.793 24.302
- ------- ----- ------- ----- ------- ---- ---- ------- ------ ------ ------- ------- -------
SUBTL 0.000 1510.964 0.000 1170.997 2810.393 210.779 363.168 388.000 1848.445 870.215
AFTER 0.000 242.666 0.000 188.066 451.358 33.852 111.744 0.000 305.762 61.554
TOTAL 0.000 1753.629 0.000 1359.063 0.00 2.40 3261.751 244.631 474.912 388.000 2154.207 931.7
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 931.769 M$
INITIAL NET GAS INTEREST 77.500000 % 9% 1003.844 M$
INITIAL NET OIL INTEREST 77.500000 % 12% 806.916 M$
15% 657.977 M$
FINAL WORKING INTEREST 97.000000 % 20% 481.081 M$
FINAL NET GAS INTEREST 77.500000 %
FINAL NET OIL INTEREST 77.500000 % TOTAL GAS REVENUE 3261.751 M$
TOTAL OIL REVENUE 0.000 M$
</TABLE>
FILE NAME: BETH2-5
REMAINING LIFE OF PROJECT IS 19 YEARS
DIRECTORY: TEXEAST
<PAGE> 49
DRILL 10 DEVELOPMENT WELLS
PROVED UNDEVELOPED RESERVES - PART OF PHASE 3
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. 10 WELL DEVELOPMENT PROGRAM (6/1/2000)
PROVED UNDEVELOPED RESERVES BETHANY, N. E.(JENKINS-WOOLWORTH-MOOR.
PANOLA COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2001 31.134 0.000 24.129 0.000 18.00 0.00 434.316 19.979 49.907 1261.000 (896.569) (706.484)
12 2002 49.090 0.000 38.045 0.000 18.00 0.00 684-810 31.501 85.554 0.000 567.754 406.711
12 2003 44.181 0.000 34.240 0.000 18.00 0.00 616.329 28.351 85.554 0.000 502.423 327.192
12 2004 39.763 0.000 30.816 0.000 18.00 0.00 554.696 25.516 85.554 0.000 443.626 262.638
12 2005 35.787 0.000 27.735 0.000 18.00 0.00 499.226 22.964 85.554 0.000 390.707 210.281
12 2006 32.208 0.000 24.961 0.000 18.00 0.00 449.303 20.668 85.554 0.000 343.081 167.862
12 2007 28.987 0.000 22.465 0.000 18.00 0.00 404.372 18.601 85.554 0.000 300.217 133.536
12 2008 26.089 0.000 20.219 0.000 18.00 0.00 363.935 16.741 85.554 0.000 261.640 105.797
12 2009 23.480 0.000 18.197 0.000 18.00 0.00 327.541 15.067 85.554 0.000 226.920 83.416
12 2010 21.132 0.000 16.377 0.000 18.00 0.00 294.787 13.560 85.554 0.000 195.673 65.391
12 2011 19.019 0.000 14.739 0.000 18.00 0.00 265.308 12.204 85.554 0.000 167.550 50.902
12 2012 17.117 0.000 13.265 0.000 18.00 0.00 238.777 10.984 85.554 0.000 142.240 39.284
12 2013 15.405 0.000 11.939 0.000 18.00 0.00 214.899 9.885 85.554 0.000 119.460 29.994
- ------- ------ ----- ------ ----- ----- ---- -------- ------- -------- -------- -------- --------
SUBTL 383.391 0.000 297.128 0.000 5348.299 246.022 1076.555 1261.000 2764.723 1176.520
AFTER 81.509 0.000 63.170 0.000 1137.055 52.304 684.432 0.000 400.318 74.490
TOTAL 464.900 0.000 360.297 0.000 18.00 0.00 6485.354 298.326 1760.986 1261.000 3165.041 1251.010
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 1251.010 M$
INITIAL NET GAS INTEREST 77.500000 % 9% 1364.355 M$
INITIAL NET OIL INTEREST 77.500000 % 12% 1054.631 M$
15% 820.611 M$
FINAL WORKING INTEREST 97.000000 % 20% 544.229 M$
FINAL NET GAS INTEREST 77.500000 %
FINAL NET OIL INTEREST 77.500000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 6485.354 M$
</TABLE>
FILE NAME: BETH3-1
REMAINING LIFE OF PROJECT IS 23 YEARS
DIRECTORY: TEXEAST
<PAGE> 50
EAST TEXAS FIELD
PROVED PRODUCING RESERVES
<PAGE> 51
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): East Texas Field Gregg County, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
Working Interest 100%
Net revenue interest (before pay out) 83.6587895%
Net revenue interest (after pay out) 83.6587895%
Royalties payable (overriding royalties) 16.3412105%
Gross area of the lease 1.5 acres
Assigned rights (depths, formations) From the surface to the base of the Woodbine
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 4
Number of wells - gas -0-
Number of producing wells - oil 1
Number of producing wells - gas -0-
Number of shut-in wells - oil 3
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells -0- (Water disposed of through the East Texas Co-Operative)
Acreage available for exploration/
Development -0-
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition July 13, 1998 acquired from Joint Venture
Cost of Acquisition (monetary and non-
monetary) Acquired in the same transaction as the J. C. Whatley Project
Breakdown of cost (monetary and non-
monetary) Acquired in the same transaction as the J. C. Whatley Project
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ---- ---- ---- ----
Net crude oil (bbls) 1,240 727 131
Net gas (mcf) -0- -0- -0-
Net cash flow from production $7,938.09 $10,334.45 -0-
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- --------
(1) See page 94 for additional information.
48
<PAGE> 52
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY EAST TEXAS FIELD
TOTAL PROVED RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 1O%
- -------- --------- --------- --------- --------- ------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 1.000 0.000 0.837 0.000 15.061 0.693 9.900 0.000 4.469 4.365
12 2000 1.927 0.000 1.612 0.000 29.018 1.335 19.800 0.000 7.883 6.833
12 2001 1.834 0.000 1.534 0.000 27.617 1.270 19.800 0.000 6.546 5.158
12 2002 1.304 0.000 1.091 0.000 19.633 0.903 13.200 0.000 5.530 3.961
12 2003 1.242 0.000 1.039 0.000 18.697 0.860 13.200 0.000 4.637 3.019
12 2004 1.182 0.000 0.989 0.000 17.805 0.819 13.200 0.000 3.786 2.242
12 2005 1.126 0.000 0.942 0.000 16.957 0.780 13.200 0.000 2.977 1.602
12 2006 1.072 0.000 0.897 0.000 16.148 0.743 13.200 0.000 2.206 1.079
12 2007 0.540 0.000 0.452 0.000 8.138 0.374 6.000 0.000 1.764 0.785
12 2008 0.513 0.000 0.430 0.000 7.732 0.356 6.000 0.000 1.376 0.556
12 2009 0.488 0.000 0.408 0.000 7.345 0.338 6.000 0.000 1.007 0.370
12 2010 0.463 0.000 0.388 0.000 6.978 0.321 6.000 0.000 0.657 0.219
12 2011 0.440 0.000 0.368 0.000 6.629 0.305 6.000 0.000 0.324 0.098
12 2012 0.418 0.000 0.350 0.000 6.297 0.290 6.000 0.000 0.008 0.002
12 2013 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ------ ----- ------ ----- ------- ----- ------- ----- ------ ------
SUBTL 13.551 0.000 11.336 0.000 204.054 9.386 151.500 0.000 43.167 30.290
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 13.551 0.000 11.336 0.000 204.054 9.386 151.500 0.000 43.167 30.290
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TOTAL NET GAS REVENUE 0.000 Ms NET PRESENT WORTH AT 10% 30.290 M$
TOTAL NET LIQ REVENUE 204.054 MS 9% 31.246 M$
12% 28.535 M$
15% 26.240 M$
20% 23.125 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
RESERVE CATEGORY OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@1O% YR
- --------------------- --------- --------- --------- --------- ------- ------ --------- ---- -------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED PRODUCING 13.551 0.000 11.336 0.000 204.054 160.886 0.000 43.167 30.290 3
------ ----- ------ ----- ------- ------- ----- ------ ------ -
EAST TEXAS FIELD 13.551 0.000 11.336 0.000 204.054 160.886 0.000 43.167 30.290
</TABLE>
RESULTS SAVED UNDER: ETFTOT
<PAGE> 53
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY EAST TEXAS FIELD
PROVED PRODUCING RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 1O%
- -------- --------- --------- --------- --------- ------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 1.000 0.000 0.837 0.000 15.061 0.693 9.900 0.000 4.469 4.365
12 2000 1.927 0.000 1.612 0.000 29.018 1.335 19.800 0.000 7.883 6.833
12 2001 1.834 0.000 1.534 0.000 27.617 1.270 19.800 0.000 6.546 5.158
12 2002 1.304 0.000 1.091 0.000 19.633 0.903 13.200 0.000 5.530 3.961
12 2003 1.242 0.000 1.039 0.000 18.697 0.860 13.200 0.000 4.637 3.019
12 2004 1.182 0.000 0.989 0.000 17.805 0.819 13.200 0.000 3.786 2.242
12 2005 1.126 0.000 0.942 0.000 16.957 0.780 11.200 0.000 2.977 1.602
12 2006 1.072 0.000 0.897 0.000 16.148 0.743 13.200 0.000 2.206 1.079
12 2007 0.540 0.000 0.452 0.000 8.138 0.374 6.000 0.000 1.764 0.785
12 2008 0.513 0.000 0.430 0.000 7.732 0.356 6.000 0.000 1.376 0.556
12 2009 0.488 0.000 0.408 0.000 7.346 0.338 6.000 0.000 1.007 0.370
12 2010 0.463 0.000 0.388 0.000 6.978 0.321 6.000 0.000 0.657 0.219
12 2011 0.440 0.000 0.368 0.000 6.629 0.305 6.000 0.000 0.324 0.098
12 2012 0.418 0.000 0.350 0.000 6.297 0.290 6.000 0.000 0.008 0.002
12 2013 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ------ ----- ------ ----- ------- ----- ------- ----- ------ ------
SUBTL 13.551 0.000 11.336 0.000 204.054 9.386 151.500 0.000 43.167 30.290
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 13.551 0.000 11.336 0.000 204.054 9.386 151.500 0.000 43.167 30.290
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 30.290 M$
TOTAL NET LIQ REVENUE 204.054 M$ 9% 31.246 M$
12% 28.535 MS
15% 26.240 MS
20% 23.125 MS
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
LEASE NAME OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@1O% YR
- --------------------- --------- --------- --------- --------- ------- -------- --------- ---- -------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLORENCE LEASE 7.935 0.000 6.638 0.000 119.488 86.496 0.000 32.991 22.239 14
LAIRD, ROY M. "BLK 122" 4.407 0.000 3.687 0.000 66.365 57.053 0.000 9.313 7.270 08
PROTHRO LEASE 1.209 0.000 1.011 0.000 18.201 17.337 0.000 0.863 0.781 03
- --------------------- -------- ----- ------ ----- ------- ------- ----- ------ ------
EAST TEXAS FIELD 13.551 0.000 11.336 0.000 204.054 160.886 0.000 43.167 30.290
</TABLE>
RESULTS SAVED UNDER: ETFPP
<PAGE> 54
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. FLORENCE LEASE
PROVED PRODUCING RESERVES EAST TEXAS (WOODBINE) FIELD
GREGG COUNTY. TEXAS
GULFTEX
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- --------- --------- --------- --------- ---- ---- ------- -------- ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.402 0.000 0.337 0.000 18.00 0.00 6.057 0.279 3.000 0.000 2.779 2.714
12 2000 0.774 0.000 0.647 0.000 18.00 0.00 11.654 0.536 6.000 0.000 5.118 4.436
12 2001 0.735 0.000 0.615 0.000 18.00 0.00 11.071 0.509 6.000 0.000 4.562 3.595
12 2002 0.698 0.000 0.584 0.000 18.00 0.00 10.518 0.484 6.000 0.000 4.034 2.890
12 2003 0.664 0.000 0.555 0.000 18.00 0.00 9.992 0.460 6.000 0.000 3.532 2.300
12 2004 0.630 0.000 0.527 0.000 18.00 0.00 9.492 0.437 6.000 0.000 3.056 1.809
12 2005 0.599 0.000 0.501 0.000 18.00 0.00 9.018 0.415 6.000 0.000 2.603 1.401
12 2006 0.569 0.000 0.476 0.000 18.00 0.00 8.567 0.394 6.000 0.000 2.173 1.063
12 2007 0.540 0.000 0.452 0.000 18.00 0.00 8.138 0.374 6.000 0.000 1.764 0.785
12 2008 0.513 0.000 0.430 0.000 18.00 0.00 7.732 0.356 6.000 0.000 1.376 0.556
12 2009 0.488 0.000 0.408 0.000 18.00 0.00 7.345 0.338 6.000 0.000 1.007 0.370
12 2010 0.463 0.000 0.388 0.000 18.00 0.00 6.978 0.321 6.000 0.000 0.657 0.219
12 2011 0.440 0.000 0.368 0.000 18.00 0.00 6.629 0.305 6.000 0.000 0.324 0.098
12 2012 0.418 0.000 0.350 0.000 18.00 0.00 6.297 0.290 6.000 0.000 0.008 0.002
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- ------- ----- ------ ----- ------ ------
SUBTL 7.935 0.000 6.638 0.000 119.488 5.496 81.000 0.000 32.991 22.239
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 7.935 0.000 6.638 0.000 18.00 0.00 119.488 5.496 81.000 0.000 32.991 22.239
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 100.000000% NET PRESENT VALUE AT 10% 22.239 M$
INITIAL NET GAS INTEREST 83.658790% 9% 23.021 M$
INITIAL NET OIL INTEREST 83-658790% 12% 20.811 M$
15% 18.960 M$
FINAL WORKING INTEREST 100.000000% 20% 16.480 M$
FINAL NET GAS INTEREST 83.658790%
FINAL NET OIL INTEREST 83.658790% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 119.488 M$
</TABLE>
FILE NAME: FLORENCE
REMAINING LIFE OF PROJECT IS 14 YEARS
DIRECTORY: TEXEAST
<PAGE> 55
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. LAIRD, ROY M. "BLK 122"
PROVED PRODUCING RESERVES EAST TEXAS(WOODBINE) FIELD
GREGG COUNTY, TEXAS
GULFTEX
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- --------- --------- --------- --------- ---- ---- ------- -------- ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.344 0.000 0.287 0.000 18.00 0.00 5.174 0.238 3.600 0.000 1.336 1.305
12 2000 0.664 0.000 0.555 0.000 18.00 0.00 9.994 0.460 7.200 0.000 2.334 2.023
12 2001 0.634 0.000 0.530 0.000 18.00 0.00 9.544 0.439 7.200 0.000 1.905 1.501
12 2002 0.605 0.000 0.506 0.000 18.00 0.00 9.115 0.419 7.200 0.000 1.496 1.071
12 2003 0.578 0.000 0.484 0.000 18.00 0.00 8.705 0.400 7.200 0.000 1.104 0.719
12 2004 0.552 0.000 0.462 0.000 18.00 0.00 8.313 0.382 7.200 0.000 0.731 0.433
12 2005 0.527 0.000 0.441 0.000 18.00 0.00 7.939 0.365 7.200 0.000 0.374 0.201
12 2006 0.503 0.000 0.421 0.000 18.00 0.00 7.582 0.349 7.200 0.000 0.033 0.016
12 2007 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2008 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2009 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2010 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2011 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- ------- ----- ------ ----- ------ ------
SUBTL 4.407 0.000 3.687 0.000 66.365 3.053 54.000 0.000 9.313 7.27
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.00
TOTAL 4.407 0.000 3.687 0.000 18.00 0.00 66.365 3.053 54.000 0.000 9.313 7.2
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 100.000000% NET PRESENT VALUE AT 10% 7.270 M$
INITIAL NET GAS INTEREST 83.658790% 9% 7.436 M$
INITIAL NET OIL INTEREST 83.658790% 12% 6.957 M$
15% 6.534 M$
FINAL WORKING INTEREST 100.000000% 20% 5.928 M$
FINAL NET GAS INTEREST 83.658790%
FINAL NET OIL INTEREST 83.658790% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 66.365 M$
</TABLE>
FILE NAME: LAIRD
REMAINING LIFE OF PROJECT IS 8 YEARS
DIRECTORY: TEXEAST
<PAGE> 56
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. PROTHRO LEASE
PROVED PRODUCING RESERVES EAST TEXAS(WOODBINE) FIELD
GREGG COUNTY, TEXAS
GULFTEX
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- --------- --------- --------- --------- ---- ---- ------- -------- ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.254 0.000 0.213 0.000 18.00 0.00 3.830 0.176 3.300 0.000 0.354 0.346
12 2000 0.489 0.000 0.409 0.000 18.00 0.00 7.369 0.339 6.600 0.000 0.430 0.373
12 2001 0.465 0.000 0.389 0.000 18.00 0.00 7.001 0.322 .6.600 0.000 0.079 0.062
12 2002 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2003 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2004 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2005 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2006 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2007 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2008 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2009 0.0(0 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2010 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2011 0.0(0 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- ------- ----- ------ ----- ------ -----
SUBTL 1.209 0.000 1.011 0.000 18.201 0.837 16.500 0.000 0.863 0.781
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 1.209 0.000 1.011 0.000 18.00 0.00 18.201 0.837 16.500 0.000 0.863 0.781
</TABLE>
<TABLE>
<S> <C> <C> <C>
INITIAL WORKING INTEREST 100.000000% NET PRESENT VALUE AT 10% 0.7811 M$
INITIAL NET GAS INTEREST 83.658790% 9% 0.789 M$
INITIAL NET OIL INTEREST 83.658790% 12% 0.767 M$
15% 0.747 M$
FINAL WORKING INTEREST 100.000000% 20% 0.716 M$
FINAL NET GAS INTEREST 83.658790X
FINAL NET OIL INTEREST 83.658790X TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 18.201 M$
</TABLE>
FILE NAME: PROTHRO
REMAINING LIFE OF PROJECT IS 3 YEARS
DIRECTORY: TEXEAST
<PAGE> 57
MITCHELL CREEK & TALCO FIELDS
PROVED PRODUCING RESERVES
AND
PROVED NON-PRODUCING RESERVES
<PAGE> 58
MITCHELL CREEK FIELD
Franklin & Hopkins Counties, Texas
The Mitchell Creek Field has been producing crude oil since the 1950's
from multiple zones. Those zones include the Sub-Clarksville, Eagle Ford,
Woodbine, Paluxy and Glenrose.
The J. L. Hedrick lease, included in this report, currently produces
from the Paluxy formation at a depth of 4515 feet. Average pay thickness is 29
feet and the crude oil produced from this zone has a specific gravity of 20.
54
<PAGE> 59
TALCO FIELD
Franklin & Titus Counties, Texas
The Talco Field was discovered in 1936 and currently produces from the
Paluxy formation at approximately 4300 feet. It has a strong water drive and
produces huge volumes of water with every barrel of oil. The Talco Field has
produced in this manner for more than 40 years and will likely continue to do so
for many more years. The Paluxy formation producing in this field has an average
thickness of 35 feet and the crude oil has a specific gravity of 22.
55
<PAGE> 60
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): Mitchell Creek Field Franklin and Hopkins Counties, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
Working Interest 95.5%
Net revenue interest (before pay out) 74.12%
Net revenue interest (after pay out) 74.12%
Royalties payable (overriding royalties) 22.5%
Gross area of the lease 1,200 acres
Assigned rights (depths, formations) From the surface to the base of the Travis Peak
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 5
Number of wells - gas -0-
Number of producing wells - oil 3
Number of producing wells - gas -0-
Number of shut-in wells - oil 2
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells 1
Acreage available for exploration/
Development 10 acres or 1 infield developmental drilling location
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition October 8, 1997 acquired from Joint Venture
Cost of Acquisition (monetary and non-
monetary) 330,415 shares of TBX Resources Stock
Breakdown of cost (monetary and non-
monetary) 330,415 shares of TBX Resources Stock
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ---- ---- ---- ----
Net crude oil (bbls) 709 2,194 4,906 388
Net gas (mcf) -0- -0- -0- -0-
Net cash flow from production $7,453.81 $43,754.07 $15,595.38 $3,677.89
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- --------
(1) See page 94 for additional information.
56
<PAGE> 61
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): Talco Field Franklin County, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
Working Interest 97%
Net revenue interest (before pay out) 80%
Net revenue interest (after pay out) 80%
Royalties payable (overriding royalties) 17.5%
Gross area of the lease 328 acres
Assigned rights (depths, formations) All Depths
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 14
Number of wells - gas -0-
Number of producing wells - oil 2
Number of producing wells - gas -0-
Number of shut-in wells - oil 12
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells 5
Acreage available for exploration/
Development 20 acres or 2 infield developmental drilling locations
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition November 15, 1997 acquired from Joint Venture
Cost of Acquisition (monetary and non-
monetary) 471,246 shares of TBX Resources Stock
Breakdown of cost (monetary and non-
monetary) 471,246 shares of TBX Resources Stock
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ---- ---- ---- ----
Net crude oil (bbls) 2,708 12,539 2,915 1,413
Net gas (mcf) -0- -0- -0- -0-
Net cash flow from production $36,905.39 $152,389.37 $25,168.93 $14,747.55
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- --------
(1) See page 94 for additional information.
57
<PAGE> 62
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
SUMMARY MITCHELL CREEK & TALCO FIELDS
TOTAL PROVED RESERVES
AS OF 04/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 21.931 0.000 17.325 0.000 285.867 13.150 48.843 135.800 88.074 86.025
12 2000 38.796 0.000 30.636 0.000 505.488 23.252 97.686 0.000 384.549 333.321
12 2001 33.775 0.000 26.659 0.000 439.880 20.234 97.686 0.000 321.960 253.700
12 2002 29.461 0.000 23.244 0.000 383.527 17.642 97.686 0.000 268.198 192.124
12 2003 25.747 0.000 20.305 0.000 335.038 15.412 97.686 0.000 221.940 144.533
12 2004 22.544 0.000 17.772 0.000 293.241 13.489 97.686 0.000 182.066 107.788
12 2005 19.777 0.000 15.585 0.000 257.148 11.829 97.686 0.000 147.633 79.457
12 2006 17.382 0.000 13.692 0.000 225.924 10.393 97.686 0.000 117.846 57.659
12 2007 15.305 0.000 12.052 0.000 198.862 9.148 97.686 0.000 92.029 40.934
12 2008 13.501 0.000 10.628 0.000 175.365 8.067 97.686 0.000 69.612 28.148
12 2009 11.931 0.000 9.389 0.000 154.924 7.127 97.686 0.000 50.111 18.421
12 2010 6.906 0.000 5.385 0.000 88.847 4.087 48.798 0.000 35.962 12.018
12 2011 6.075 0.000 4.735 0.000 78.119 3.593 48.798 0.000 25.728 7.816
12 2012 3.537 0.000 2.717 0.000 44.823 2.062 25.518 0.000 17.243 4.762
12 2013 1.733 0.000 1.284 0.000 21.188 0.975 5.730 0.000 14.484 3.636
- ------- ------ ----- ------ ----- ------- ------ ------ ----- ------- -------
SUBTL 268.399 0.000 211.409 0.000 3488.242 160.459 1154.547 135.800 2037.436 1370.344
AFTER 10.156 0.000 7.528 0.000 124.202 5.713 57.300 0.000 61.190 10.928
TOTAL 278.555 0.000 218.936 0.000 3612.444 166.172 1211.847 135.800 2098.626 1381.272
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 1381.272 M$
TOTAL NET LIQ REVENUE 3612.444 M$ 9% 1431.782 M$
12% 1289.493 M$
15% 1171.197 M$
20% 1013.373 M$
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
RESERVE CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
----------- ---------- ---------- ---------- ------- ------ ------- -------- -------- --
PROVED PRODUCING 140.507 0.000 108.498 0.000 1790.211 736.059 0.000 1054.153 672.062 25
PROVED NONPRODUCING 138.048 0.000 110.438 0.000 1822.233 641.961 135.800 1044.473 709.210 0
------- ----- ------- ----- -------- ------- ------- -------- -------- -
MITCHELL CREEK &
TALCO FIELDS 278.555 0.000 218.936 0.000 3612.444 1378.020 135.800 2098.626 1381.272
RESULTS SAVED UNDER: MITCHTOT
</TABLE>
<PAGE> 63
MITCHELL CREEK & TALCO FIELDS
PROVED PRODUCING RESERVES
59
<PAGE> 64
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY MITCHELL CREEK & TALCO FIELDS
PROVED PRODUCING RESERVES
<TABLE>
<CAPTION>
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- --------- --------- --------- --------- ------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 9.487 0.000 7.370 0.000 121.600 5.594 27.309 0.000 88.698 86.634
12 2000 17.302 0.000 13.441 0.000 221.773 10.202 54.618 0.000 156.954 136.045
12 2001 15.572 0.000 12.097 0.000 199.596 9.181 54.618 0.000 135.796 107.006
12 2002 14.015 0.000 10.887 0.000 179.636 8.263 54.618 0.000 116.755 83.637
12 2003 12.613 0.000 9.798 0.000 161.672 7.437 54.618 0.000 99.618 64.874
12 2004 11.352 0.000 8.818 0.000 145.505 6.693 54.618 0.000 84.194 49.845
12 2005 10.217 0.000 7.937 0.000 130.955 6.024 54.618 0.000 70.313 37.843
12 2006 9.195 0.000 7.143 0.000 117.859 5.422 54.618 0.000 57.820 28.290
12 2007 8.275 0.000 6.429 0.000 106.073 4.879 54.618 0.000 46.576 20.717
12 2008 7.448 0.000 5.786 0.000 95.466 4.391 54.618 0.000 36.456 14.742
12 2009 6.703 0.000 5.207 0.000 85.919 3.952 54.618 0.000 27.349 10.053
12 2010 2.377 0.000 1.762 0.000 29.065 1.337 5.730 0.000 21.998 7.351
12 2011 2.139 0.000 1.585 0.000 26.158 1.203 5.730 0.000 19.225 5.841
12 2012 1.925 0.000 1.427 0.000 23.542 1.083 5.730 0.000 16.730 4.620
12 2013 1.733 0.000 1.284 0.000 21.188 0.975 5.730 0.000 14.484 3.636
SUBTL 130.351 0.000 100.970 0.000 1666.009 76.636 596.409 0.000 992.963 661.134
AFTER 10.156 0.000 7.527 0.000 124.203 5.713 57.300 0.000 61.189 10.928
TOTAL 140.507 0.000 108.498 0.000 1790.211 82.350 653.709 0.000 1054.153 672.062
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 672.062 M$
TOTAL NET LIQ REVENUE 1790.211 M$ 9% 697.524 M$
12% 626.340 M$
15% 568.418 M$
20% 492.827 M$
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
LEASE NAME OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
- --------------------- --------- --------- --------- --------- ------- ------ --------- ---- -------- --
HAGANSPOR'r UNIT 74.047 0.000 59.238 0.000 977.425 558.286 0.000 419.139 305.318 11
HEDRICK, J.L. #1-A 66.460 0.000 49.260 0.000 812.786 177.773 0.000 635.013 366.744 25
MITCHELL CREEK &
TALCO FIELDS 140.507 0.000 108.498 0.000 1790.211 736.059 0.000 1054.153 672.062
</TABLE>
RESULTS SAVED UNDER: MITCHPP
<PAGE> 65
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. HAGANSPORT UNIT
PROVED PRODUCING RESERVES TALCO FIELD
FRANKLIN COUNTY. TEXAS
GULFTEX. INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- --------- --------- --------- --------- ---- ---- ------- -------- ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 5.750 0.000 4.600 0.000 16.50 0.00 75.895 3.491 24.444 0.000 47.960 46.844
12 2000 10.486 0.000 8.389 0.000 16.50 0.00 138.416 6.367 48.888 0.000 83.161 72.082
12 2001 9.437 0.000 7.550 0.000 16.50 0.00 124.574 5.730 48.888 0.000 69.956 55.124
12 2002 8.494 0.000 6.795 0.000 16.50 0.00 112.117 5.157 48.888 0.000 58.071 41.599
12 2003 7.644 0.000 6.115 0.000 16.50 0.00 100.905 4.642 48.888 0.000 47.375 30.852
12 2004 6.880 0.000 5.504 0.000 16.50 0.00 90.814 4.177 48.888 0.000 37.749 22.348
12 2005 6.192 0.000 4.954 0.000 16.50 0.00 81.733 3.760 48.888 0.000 29.085 15.654
12 2006 5.573 0.000 4.458 0.000 16.50 0.00 73.560 3.384 48.888 0.000 21.288 10.416
12 2007 5.015 0.000 4.012 0.000 16.50 0.00 66.204 3.045 48.888 0.000 14.270 6.347
12 2008 4.514 0.000 3.611 0.000 16.50 0.00 59.583 2.741 48.888 0.000 7.954 3.216
12 2009 4.062 0.000 3.250 0.000 16.50 0.00 53.625 2.467 48.888 0.000 2.270 0.835
12 2010 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2011 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
SUBTL 74.047 0.000 59.238 0.000 7.425 44.962 513.324 0.000 419.139 305.318
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 74.047 0.000 59.238 0.000 16.50 0.000 977.425 44.962 513.324 0.000 419.139 305.3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.000000% NET PRESENT VALUE AT 10% 305.318 M$
INITIAL NET GAS INTEREST 80.000000% 9% 314.070 M$
INITIAL NET OIL INTEREST 80.000000% 12% 289.111 M$
15% 267.636 M$
FINAL WORKING INTEREST 97.000000% 20% 237.950 M$
FINAL NET GAS INTEREST 80.000000%
FINAL NET OIL INTEREST 80.000000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 977.425 M$
</TABLE>
FILE NAME: HAGAN
REMAINING LIFE OF PROJECT IS 11 YEARS
DIRECTORY: TEXEAST
<PAGE> 66
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. HEDRICK. J.L. #1-A
PROVED PRODUCING RESERVES MITCHELL CREEK FIELD
HOPKINS COUNTY, TEXAS
GULFTEX
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- --------- --------- --------- --------- ---- ---- ------- -------- ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 3.737 0.000 2.770 0.000 16.50 0.00 45.706 2.102 2.865 0.000 40.738 39.790
12 2000 6.816 0.000 5.052 0.000 16.50 0.00 83.357 3.834 5.730 0.000 73.793 63.963
12 2001 6.134 0.000 4.547 0.000 16.50 0.00 75.022 3.451 5.730 0.000 65.841 51.882
12 2002 5.521 0.000 4.092 0.000 16.50 0.00 67.519 3.106 5.730 0.000 58.684 42.038
12 2003 4.969 0.000 3.683 0.000 16.50 0.00 60.767 2.795 5.730 0.000 52.242 34.022
12 2004 4.472 0.000 3.315 0.000 16.50 0.00 54.691 2.516 5.730 0.000 46.445 27.497
12 2005 4.025 0.000 2.983 0.000 16.50 0.00 49.222 2.264 5.730 0.000 41.227 22.189
12 2006 3.622 0.000 2.685 0.000 16.50 0.00 44.299 2.038 5.730 0.000 36.532 17.874
12 2007 3.260 0.000 2.416 0.000 16.50 0.00 39.869 1.834 5.730 0.000 32.305 14.369
12 2008 2.934 0.000 2.175 0.000 16.50 0.00 35.883 1.651 5.730 0.000 28.502 11.525
12 2009 2.641 0.000 1.957 0.000 16.50 0.00 32.294 1.486 5.730 0.000 25.079 9.219
12 2010 2.377 0.000 1.762 0.000 16.50 0.00 29.065 1.337 5.730 0.000 21.998 7.351
12 2011 2.139 0.000 1.585 0.000 16.50 0.00 26.158 1.203 5.730 0.000 19.225 5.841
12 2012 1.925 0.000 1.427 0.000 16.50 0.00 23.542 1.083 5.730 0.000 16.730 4.620
12 2013 1.733 0.0(0 1.284 0.000 16.50 0.00 21.188 0.975 5.730 0.000 14.484 3.636
SUBTL 56.304 0.000 41.732 0.000 8.584 31.675 83.085 0.000 573.824 355.8
AFTER 10.156 0.000 7.527 0.000 4.203 5.713 57.300 0.000 61.189 10.9
TOTAL 66.459 0.000 49.260 0.000 16.50 0.00 812.786 37.388 140.385 0.000 635.013 366.7
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 95.500000 % NET PRESENT VALUE AT 10% 366.744 M$
INITIAL NET GAS INTEREST 74.120000 % 9% 383.454 M$
INITIAL NET OIL INTEREST 74.120000 % 12% 337.229 M$
15% 300.782 M$
FINAL WORKING INTEREST 95.500000 % 20% 254.876 M$
FINAL NET GAS INTEREST 74.120000 %
FINAL NET OIL INTEREST 74.120000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 812.786 M$
</TABLE>
FILE NAME: HED
REMAINING LIFE OF PROJECT IS 25 YEARS
DIRECTORY: TEXEAST
<PAGE> 67
MITCHELL CREEK & TALCO FIELDS
PROVED NON-PRODUCING RESERVES
63
<PAGE> 68
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
SUMMARY MITCHELL CREEK & TALCO FIELDS
PROVED NON-PRODUCING RESERVES
AS OF 04/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- -------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 12.444 0.000 9.956 0.000 164.267 7.556 21.534 135.800 (0.624) (0.609)
12 2000 21.494 0.000 17.195 0.000 283.715 13.051 43.068 0.000 227.596 197.276
12 2001 18.203 0.000 14.563 0.000 240.284 11.053 43.068 0.000 186.163 146.694
12 2002 15.446 0.000 12.357 0.000 203.891 9.379 43.068 0.000 151.444 108.487
12 2003 13.134 0.000 10.507 0.000 173.365 7.975 43.068 0.000 122.322 79.660
12 2004 11.192 0.000 8.954 0.000 147.736 6.796 43.068 0.000 97.872 57.943
12 2005 9.560 0.000 7.648 0.000 126.194 5.805 43.068 0.000 77.321 41.614
12 2006 8.187 0.000 6.549 0.000 108.065 4.971 43.068 0.000 60.026 29.369
12 2007 7.029 0.000 5.624 0.000 92.789 4.268 43.068 0.000 45.453 20.217
12 2008 6.053 0.000 4.842 0.000 79.899 3.675 43.068 0.000 33.156 13.407
12 2009 5.228 0.000 4.182 0.000 69.005 3.174 43.068 0.000 22.763 8.368
12 2010 4.529 0.000 3.623 0.000 59.782 2.750 43.068 0.000 13.964 4.667
12 2011 3.936 0.000 3.149 0.000 51.961 2.390 43.068 0.000 6.503 1.976
12 2012 1.612 0.000 1.290 0.000 21.281 0.979 19.788 0.000 0.514 0.142
12 2013 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ------- ----- ------- ----- -------- ------ ------- ------- -------- -------
SUBTL 138.048 0.000 110.438 0.000 1822.233 83.823 558.138 135.800 1044.473 709.210
AFTER (0.000) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 138.048 0.000 110.438 0.000 1822.233 83.823 558.138 135.800 1044.473 709.210
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 709.210 M$
TOTAL NET LIQ REVENUE 1822.233 M$ 9% 734.258 M$
12% 663.153 M$
15% 602.779 M$
20% 520.547 M$
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
LEASE NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
---------- ---------- ---------- ---------- ------- ------ --------- --------- --------- --
BRILEY, RAY 18.470 0.000 14.776 0.000 243.808 121.213 19.400 103.194 65.742 14
GALLATIN, LILLIE J. 49.739 0.000 39.791 0.000 656.559 175.702 48.500 432.358 298.666 13
GRIMES, B.R. 53.463 0.000 42.771 0.000 705.715 189.603 48.500 467.612 322.533 14
JENNINGS, V.W. 16.375 0.000 13.100 0.000 216.151 155.443 19.400 41.308 22.269 13
WATTS, J.L. 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0
------ ----- ------ ----- ------- ------- ------ ------- ------- --
MITCHELL CREEK &
TALCO FIELDS 138.048 0.000 110.438 0.000 1822.233 641.961 135.800 10.473 709.210
</TABLE>
RESULTS SAVED UNDER: MITCHNP
<PAGE> 69
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. BRILEY, RAY
PROVED NON-PRODUCING RESERVES TALCO FIELD
FRANKLIN COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 1.265 0.000 1.012 0.000 16.50 0.00 16.697 0.768 4.074 19.400 (7.545) (7.370)
12 2000 2.307 0.000 1.846 0.000 16.50 0.00 30.451 1.401 8.148 0.000 20.903 18.118
12 2001 2.076 0.000 1.661 0.000 16.50 0.00 27.406 1.261 8.148 0.000 17.998 14.182
12 2002 1.869 0.000 1.495 0.000 16.50 0.00 24.666 1.135 8.148 0.000 15.383 11.020
12 2003 1.682 0.000 1.345 0.000 16.50 0.00 22.199 1.021 8.148 0.000 13.030 8.485
12 2004 1.514 0.000 1.211 0.000 16.50 0.00 19.979 0.919 8.148 0.000 10.912 6.460
12 2005 1.362 0.000 1.090 0.000 16.50 0.00 17.981 0.827 8.148 0.000 9.006 4.847
12 2006 1.226 0.000 0.981 0.000 16.50 0.00 16.183 0.744 8.148 0.000 7.291 3.578
12 2007 1.103 0.000 0.883 0.000 16.50 0.00 14.565 0.670 8.148 0.000 5.747 2.556
12 2008 0.993 0.000 0.794 0.000 16.50 0.00 13.108 0.603 8.148 0.000 4.357 1.762
12 2009 0.894 0.000 0.715 0.000 16.50 0.00 11.797 0.543 8.148 0.000 3.107 1.142
12 2010 0.804 0.000 0.643 0.000 16.50 0.00 10.618 0.488 8.148 0.000 1.981 0.652
12 2011 0.724 0.000 0.579 0.000 16.50 0.00 9.556 0.440 8.148 0.000 0.968 0.294
12 2012 0.652 0.000 0.521 0.000 16.50 0.00 8.600 0.396 8.148 0.000 0.057 0.016
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- ------ ----- ----- ----- ----- -----
SUBTL 18.470 0.000 14.776 0.000 3.808 11.215 109.998 19.400 103.194 65.742
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 18.470 0.000 14.776 0.000 16.50 0.000 243.808 11.215 109.998 19.400 103.194 65.742
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 65.742 M$
INITIAL NET GAS INTEREST 80.000000 % 9% 68.491 M$
INITIAL NET OIL INTEREST 80.000000 % 12% 60.712 M$
15% 54.171 M$
FINAL WORKING INTEREST 97.000000 % 20% 45.367 M$
FINAL NET GAS INTEREST 80.000000 %
FINAL NET OIL INTEREST 80.000000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 243.808 M$
</TABLE>
FILE NAME: BRILEY
REMAINING LIFE OF PROJECT IS 14 YEARS
DIRECTORY: TEXEAST
<PAGE> 70
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. GALLATIN, LILLIE J.
PROVED NON-PRODUCING RESERVES TALCO FIELD
FRANKLIN COUNTY, TEXAS
GULFTEX. INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- ---------- ---------- ---------- ---------- ---- ---- -------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 5.010 0.000 4.008 0.000 16.50 0.00 66.130 3.042 5.820 48.500 8.768 8.564
12 2000 8.514 0.000 6.811 0.000 16.50 0.00 112.386 5.170 11.640 0.000 95.576 82.844
12 2001 7.067 0.000 5.653 0.000 16.50 0.00 93.280 4.291 11.640 0.000 77.349 60.950
12 2002 5.865 0.000 4.692 0.000 16.50 0.00 77.423 3.561 11.640 0.000 62.221 44.572
12 2003 4.868 0.000 3.895 0.000 16.50 0.00 64.261 2.956 11.640 0.000 49.665 32.343
12 2004 4.041 0.000 3.233 0.000 16.50 0.00 53.336 2.453 11.640 0.000 39.243 23.233
12 2005 3.354 0.000 2.683 0.000 16.50 0.00 44.269 2.036 11.640 0.000 30.593 16.465
12 2006 2.784 0.000 2.227 0.000 16.50 0.00 36.743 1.690 11.640 0.000 23.413 11.456
12 2007 2.310 0.000 1.848 0.000 16.50 0.00 30.497 1.403 11.640 0.000 17.454 7.764
12 2008 1.918 0.000 1.534 0.000 16.50 0.00 25.313 1.164 11.640 0.000 12.508 5.058
12 2009 1.592 0.000 1.273 0.000 16.50 0.00 21.009 0.966 11.640 0.000 8.403 3.089
12 2010 1.321 0.000 1.057 0.000 16.50 0.00 17.438 0.802 11.640 0.000 4.996 1.669
12 2011 1.096 0.000 0.877 0.000 16.50 0.00 14.473 0.666 11.640 0.000 2.168 0.659
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- -------- ----- ------ ------ ------ ------
SUBTL 49.739 0.000 39.791 0.000 656.559 30.202 145.500 48.500 432.358 298.666
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 49.739 0.000 39.791 0.000 16.50 0.00 656.559 30.202 145.500 48.500 432.358 298.666
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 298.666 M$
INITIAL NET GAS INTEREST 80.000000 % 9% 308.716 M$
INITIAL NET OIL INTEREST 80.000000 % 12% 280.156 M$
15% 255.829 M$
FINAL WORKING INTEREST 97.000000 % 20% 222.571 M$
FINAL NET GAS INTEREST 80.000000 %
FINAL NET OIL INTEREST 80.000000 % TOTAL GAS REVENUE 0.000
TOTAL OIL REVENUE 656.559
</TABLE>
FILE NAME: GALL
REMAINING LIFE OF PROJECT IS 13 YEARS
DIRECTORY: TEXEAST
<PAGE> 71
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. GRIMES, B.R.
PROVED NON-PRODUCING RESERVES TALCO FIELD
FRANKLIN COUNTY. TEXAS
GULFTEX, INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 5.288 0.000 4.231 0.000 16.50 0.00 69.804 3.211 5.820 48.500 12.273 11.988
12 2000 8.987 0.000 7.190 0.000 16.50 0.00 118.630 5.457 11.640 0.000 101.533 88.007
12 2001 7.459 0.000 5.967 0.000 16.50 0.00 98.463 4.529 11.640 0.000 82.293 64.846
12 2002 6.191 0.000 4.953 0.000 16.50 0.00 81.724 3.759 11.640 0.000 66.325 47.512
12 2003 5.139 0.000 4.111 0.000 16.50 0.00 67.831 3.120 11.640 0.000 53.071 34.561
12 2004 4.265 0.000 3.412 0.000 16.50 0.00 56.300 2.590 11.640 0.000 42.070 24.906
12 2005 3.540 0.000 2.832 0.000 16.50 0.00 46.729 2.150 11.640 0.000 32.939 17.728
12 2006 2.938 0.000 2.351 0.000 16.50 0.00 38.785 1.784 11.640 0.000 25.361 12.408
12 2007 2.439 0.000 1.951 0.000 16.50 0.00 32.191 1.481 11.640 0.000 19.071 8.483
12 2008 2.024 0.000 1.619 0.000 16.50 0.00 26.719 1.229 11.640 0.000 13.850 5.600
12 2009 1.680 0.000 1.344 0.000 16.50 0.00 22.177 1.020 11.640 0.000 9.516 3.498
12 2010 1.394 0.000 1.116 0.000 16.50 0.00 18.407 0.847 11.640 0.000 5.920 1.978
12 2011 1.157 0.000 0.926 0.000 16.50 0.00 15.277 0.703 11.640 0.000 2.935 0.892
12 2012 0.961 0.000 0.769 0.000 16.50 0.00 12.680 0.583 11.640 0.000 0.457 0.126
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- ------ ----- ------ ----- ------ ------
SUBTL 53.463 0.000 42.771 0.000 705.715 32.463 157.140 48.500 467.612 322.533
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 53.463 0.000 42.771 1.000 16.50 0.00 705.715 32.463 157.140 48.500 467.612 322.533
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 322.533 M$
INITIAL NET GAS INTEREST 80.000000 % 9% 333.399 M$
INITIAL NET OIL INTEREST 80.000000 % 12% 302.539 M$
15 % 276.296 M$
FINAL WORKING INTEREST 97.000000 % 20% 240.482 M$
FINAL NET GAS INTEREST 80.000000 %
FINAL NET OIL INTEREST 80.000000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 705.715 M$
</TABLE>
FILE NAME: GRIMES
REMAINING LIFE OF PROJECT IS 14 YEARS
DIRECTORY: TEXEAST
<PAGE> 72
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. JENNINGS, V. W.
PROVED NON-PRODUCING RESERVES TALCO FIELD
FRANKLIN COUNTY, TEXAS
GULFTEX. INC.
AS OF 07/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.881 0.000 0.705 0.000 16.50 0.00 11.635 0.535 5.820 19.400 (14.120) (13.792)
12 2000 1.685 0.000 1.348 0.000 16.50 0.00 22.247 1.023 11.640 0.000 9.584 8.307
12 2001 1.601 0.000 1.281 0.000 16.50 0.00 21.135 0.972 11.640 0.000 8.523 6.716
12 2002 1.521 0.000 1.217 0.000 16.50 0.00 20.078 0.924 11.640 0.000 7.515 5.383
12 2003 1.445 0.000 1.156 0.000 16.50 0.00 19.074 0.877 11.640 0.000 6.557 4.270
12 2004 1.373 0.000 1.098 0.000 16.50 0.00 18.121 0.834 11.640 0.000 5.647 3.343
12 2005 1.304 0.000 1.043 0.000 16.50 0.00 17.215 0.792 11.640 0.000 4.783 2.574
12 2006 1.239 0.000 0.991 0.000 16.50 0.00 16.354 0.752 11.640 0.000 3.962 1.938
12 2007 1.177 0.000 0.942 0.000 16.50 0.00 15.536 0.715 11.640 0.000 3.182 1.415
12 2008 1.118 0.000 0.895 0.000 16.50 0.00 14.759 0.679 11.640 0.000 2.440 0.987
12 2009 1.062 0.000 0.850 0.000 16.50 0.00 14.021 0.645 11.640 0.000 1.736 0.638
12 2010 1.009 0.000 0.807 0.000 16.50 0.00 13.320 0.613 11.640 0.000 1.068 0.357
12 2011 0.959 0.000 0.767 0.000 16.50 0.00 12.654 0.582 11.640 0.000 0.432 0.131
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.00-
- ------- ----- ----- ----- ----- ----- ---- ------ ----- ------ ----- ------ ------
SUBTL 16.375 0.000 13.100 0.000 216.151 9.943 145.500 19.400 41.308 22.269
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 16.375 0.000 13.100 0.000 16.50 0.00 216.151 9.943 145.500 19.400 41.308 22.269
INITIAL WORKING INTEREST 97.000000 % NET PRESENT VALUE AT 10% 22.269 M$
INITIAL NET GAS INTEREST 80.000000 % 9% 23.652 M$
INITIAL NET OIL INTEREST 80.000000 % 12% 19.746 M$
15% 16.482 M$
FINAL WORKING INTEREST 97.000000 % 20% 12.127 M$
FINAL NET GAS INTEREST 80.000000 %
FINAL NET OIL INTEREST 80.000000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 216.151 M$
</TABLE>
FILE NAME: JENN
REMAINING LIFE OF PROJECT IS 13 YEARS
DIRECTORY: TEXEAST
<PAGE> 73
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
TEXEAST OPERATING CO. WATTS. J. L.
PROVED NON-PRODUCING RESERVES MITCHELL CREEK FIELD
FRANKLIN COUNTY. TEXAS
GULFTEX, INC.
AS OF 04/01/99
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2000 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2001 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2002 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2003 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2004 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2005 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2006 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2007 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2008 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2009 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2010 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2011 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ---- ---- ----- ----- ----- ----- ------ ------
SUBTL 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
INITIAL WORKING INTEREST 95.500000 % NET PRESENT VALUE AT 10% 0.000 M$
INITIAL NET GAS INTEREST 74.120000 % 9% 0.000 M$
INITIAL NET OIL INTEREST 74.120000 % 12% 0.000 M$
15% 0.000 M$
FINAL WORKING INTEREST 95.500000 % 20% 0.000 M$
FINAL NET GAS INTEREST 74.120000 %
FINAL NET OIL INTEREST 74.120000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 0.000 M$
</TABLE>
FILE NAME: WATTS
PRODUCING BELOW ECONOMIC LIMIT
DIRECTORY: TEXEAST
<PAGE> 74
MANZIEL, QUITMAN & MISCELLANEOUS
WOOD COUNTY FIELDS
PROVED PRODUCING RESERVES
AND
PROVED NON-PRODUCING RESERVES
<PAGE> 75
MANZIEL FIELD
Wood County, Texas
Historically, wells in and around the Manziel Field were drilled during
the 1940's and 1950's. Several of the wells have produced for 40 or 50 years,
with cumulative production reaching as much as 500,000 barrels per well.
The Manziel (Sub-Clarksville FB A) reservoir is found at a depth of
about 4150 feet and has an average thickness of 15 feet. It produces a heavy
crude oil with a specific gravity of 18.
MERIGALE-PAUL FIELD
Wood County, Texas
The Merigale-Paul Field has several productive intervals. The Paluxy
zone in this area is found at a depth of approximately 7000 feet and produces
crude oil with a specific gravity of 32. The Woodbine and Sub-Clarksville
formations are also productive in this field. Wells in this field usually
produce water later in their life.
<PAGE> 76
QUITMAN FIELD
Wood County, Texas
The Quitman Field has produced oil and gas for many years from multiple
zones, including the Sub-Clarksville, Eagle Ford, Derr and Paluxy.
The Sub-Clarksville reservoir is found at a depth of approximately 4000
feet and produces crude oil having a specific gravity of 40. Average thickness
of the Sub-Clarksville in this area is 10 feet.
The Eagle Ford is at a depth of 4210 feet and produces crude oil with a
specific gravity of 43.
The Derr interval produces 26-gravity crude at a depth of approximately
4173 feet. Average thickness of the zone is 5 feet.
The Paluxy formation is found at approximately 6300 feet and has an
average thickness of 35 feet. It produces crude oil with a specific gravity of
38.
<PAGE> 77
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): Manziel Field (Pittman-Heirs) Wood County, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
Working Interest 97.5%
Net revenue interest (before pay out) 74.0625%
Net revenue interest (after pay out) 74.0625%
Royalties payable (overriding royalties) 25%
Gross area of the lease 293 acres
Assigned rights (depths, formations) From the surface to 7,000 feet
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 9
Number of wells - gas -0-
Number of producing wells - oil -1-
Number of producing wells - gas -0-
Number of shut-in wells - oil 8
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells -0-
Acreage available for exploration/
Development 50 acres or 5 infield developmental drilling locations
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition November 15, 1997 acquired from Joint Venture
Cost of Acquisition (monetary and non-monetary) 586,621 shares of TBX Resources Stock
Breakdown of cost (monetary and non-monetary) 586,621 shares of TBX Resources Stock
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ----- ---- ---- ----
Net crude oil (bbls) 1,358 1,012 945 687
Net gas (mcf) -0- -0- -0- -0-
Net cash flow from production $12,168.27 $13,611.89 $1,945.27 $7,981.81
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- ------------------
(1) See page 94 for additional information.
72
<PAGE> 78
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): Quitman Field Wood County, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Working Interest 97.75%
Net revenue interest (before pay out) 75.81%
Net revenue interest (after pay out) 75.81%
Royalties payable (overriding royalties) 22.5%
Gross area of the lease 400 acres
Assigned rights (depths, formations) From the surface to 7,000 feet
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 3
Number of wells - gas -0-
Number of producing wells - oil 3
Number of producing wells - gas -0-
Number of shut-in wells - oil 3
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells 1
Acreage available for exploration/
Development -0-
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition October 8, 1997 acquired from Joint Venture
Cost of Acquisition (monetary and non-monetary) 243,750 shares of TBX Resources Stock
Breakdown of cost (monetary and non-monetary) 243,750 shares of TBX Resources Stock
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ----- ---- ---- ----
Net crude oil (bbls) 584 3,759 4,887 32
Net gas (mcf) -0- -0- -0- -0-
Net cash flow from production $6,852.26 $63,822.52 $50,802.26 -0-
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- --------
(1) See page 94 for additional information.
73
<PAGE> 79
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------------------------------------------------------
PROJECT NAME & LOCATION(1): JC Whatley Project Wood County, Texas
- ----------------------------------------------------- ------------------------------------------------------------------------------
Type of Holding Lease
- ----------------------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Working Interest 95.5%
Net revenue interest (before pay out) 71.62%
Net revenue interest (after pay out) 71.62%
Royalties payable (overriding royalties) 25%
Gross area of the lease 45 acres
Assigned rights (depths, formations) From the surface to the base of the SubClarksville
Lease expiration Held by production or activity
- ----------------------------------------------------- ------------------------------------------------------------------------------
Number of wells - oil 2
Number of wells - gas -0-
Number of producing wells - oil -0-
Number of producing wells - gas -0-
Number of shut-in wells - oil 2
Number of shut-in wells - gas -0-
Number of abandoned wells - oil -0-
Number of abandoned wells - gas -0-
Number of disposal wells -0-
Acreage available for exploration/
Development -0-
- ----------------------------------------------------- ------------------------------------------------------------------------------
Proximity to pipeline or other modes of transport. All crude is trucked
- ----------------------------------------------------- ------------------------------------------------------------------------------
Date of acquisition July 13, 1998 acquired from Joint Venture
Cost of Acquisition (monetary and non-monetary) 346,663 shares of TBX Resources Stock
Breakdown of cost (monetary and non-monetary) 346,663 shares of TBX Resources Stock
How was acquisition structure derived Like Kind Exchange
- ----------------------------------------------------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994 YTD*
---- ---- ----- ---- ---- ----
Net crude oil (bbls) 314 649 1,157 2
Net gas (mcf) -0- -0- -0- -0-
Net cash flow from production $1,095.79 $11,424.31 $14,392.15 -0-
- ----------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
- --------
(1) See page 94 for additional information.
74
<PAGE> 80
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
SUMMARY MANZIEL, QUITMAN & MISC. WOOD CO. FIELDS
TOTAL PROVED RESERVES
AS OF 07/01/99
GROSS PRODUCTION NET PRODUCTION
YEAR END --------------------- ---------------------- NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- ---------- ---------- --------- -------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 12.804 0.000 9.568 0.000 172.219 7.922 55.220 277.700 (168.623) (164.699)
12 2000 23.928 0.000 17.879 0.000 321.816 14.804 110.440 0.000 196.572 170.385
12 2001 22.145 0.000 16.545 0.000 297.818 13.700 110.440 0.000 173.678 136.855
12 2002 20.506 0.000 15.320 0.000 275.766 12.685 110.440 0.000 152.640 109.344
12 2003 18.999 0.000 14.194 0.000 255.486 11.752 110.440 0.000 133.293 86.8D4
12 2004 17.612 0.000 13.157 0.000 236.823 10.894 110.440 0.000 115.488 68.372
12 2005 15.902 0.000 11.874 0.000 213.731 9.832 104.575 0.000 99.324 53.457
12 2006 14.790 0.000 11.043 0.000 198.776 9.144 104.575 0.000 85.057 41.616
12 2007 13.759 0.000 10.273 0.000 184.921 8.506 104.575 0.000 71.839 31.954
12 2008 11.969 0.000 8.942 0.000 160.948 7.404 92.876 0.000 60.669 24.532
12 2009 11.167 0.000 8.342 0.000 150.158 6.907 92.876 0.000 50.376 18.518
12 2010 10.421 0.000 7.785 0.000 140.123 6.446 92.876 0.000 40.802 13.635
12 2011 8.822 0.000 6.596 0.000 118.723 5.461 81.176 0.000 32.086 9.748
12 2012 6.734 0.000 5.038 0.000 90.676 4.171 61.271 0.000 25.235 6.969
12 2013 6.286 0.000 4.702 0.000 84.641 3.893 61.271 0.000 19.477 4.890
- ------- -------- -------- -------- -------- -------- --------- -------- ------- -------- ---------
SUBTL 215.843 0.000 161.257 0.000 2902.624 133.521 1403.492 277.700 1087.911 612.381
AFTER 17.281 0.000 12.884 0.000 231.918 10.668 173.076 0.000 48.174 9.031
TOTAL 233.124 0.000 174.141 0.000 3134.541 144.189 1576.568 277.700 1136.084 621.412
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 621.412 M$
TOTAL NET LIQ REVENUE 3134.541 M$ 9% 656.001 M$
12% 559.346 M$
15% 480.937 M$
20% 379.363 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
--------------------- --------------------- NET OPER OPER EXP TOTAL CASH FLOW DISC CASH
RESERVE CATEGORY OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10%
- -------------------- ---------- ---------- ---------- ---------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED PRODUCING 56.212 0.000 42.172 0.000 759.104 328.168 0.000 430.936 256.830
PROVED NON-PRODUCING 176.912 0.000 131.969 0.000 2375.437 1392.589 277.700 705.148 364.582
- -------------------- -------- --------- --------- --------- ---------- --------- -------- --------- ---------
MANZIEL. QUITMAN &
MISC. WOOD 233.124 0.000 174.141 0.000 3134.541 1720.757 277.700 1136.084 621.412
</TABLE>
RESULTS SAVED UNDER: MANZLTOT
<PAGE> 81
MANZIEL, QUITMAN & MISCELLANEOUS
WOOD COUNTY FIELDS
PROVED PRODUCING RESERVES
76
<PAGE> 82
<TABLE>
<CAPTION>
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY MANZIEL, QUITMAN & MISC. WOOD CO. FIELD
PROVED PRODUCING RESERVES
AS OF 07/01/99
GROSS PRODUCTION NET PRODUCTION
YEAR END --------------------- ------------------------ NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 3.106 0.000 2.337 0.000 42.066 1.935 9.671 0.000 30.460 29.751
12 2000 5.717 0.000 4.301 0.000 77.420 3.561 19.343 0.000 54.516 47.253
12 2001 5.206 0.000 3.915 0.000 70.479 3.242 19.343 0.000 47.894 37.740
12 2002 4.745 0.000 3.568 0.000 64.231 2.955 19.343 0.000 41.934 30.039
12 2003 4.330 0.000 3.256 0.000 58.599 2.696 19.343 0.000 36.561 23.810
12 2004 3.956 0.000 2.973 0.000 53.516 2.462 19.343 0.000 31.712 18.774
12 2005 3.184 0.000 2.390 0.000 43.018 1.979 13.478 0.000 27.562 14.834
12 2006 2.943 0.000 2.208 0.000 39.745 1.828 13.478 0.000 24.439 11.958
12 2007 2.720 0.000 2.041 0.000 36.730 1.690 13.478 0.000 21.563 9.591
12 2008 2.515 0.000 1.886 0.000 33.952 1.562 13.478 0.000 18.912 7.647
12 2009 2.325 0.000 1.744 0.000 31.391 1.444 13.478 0.000 16.469 6.054
12 2010 2.151 0.000 1.613 0.000 29.029 1.335 13.478 0.000 14.217 4.751
12 2011 1.990 0.000 1.492 0.000 26.852 1.235 13.478 0.000 12.139 3.688
12 2012 1.841 0.000 1.380 0.000 24.844 1.143 13.478 0.000 10.224 2.824
12 2013 1.704 0.000 1.277 0.000 22.991 1.058 13.478 0.000 8.456 2.123
- -------- ---------- --------- --------- ----------- ---------- ---------- ---------- --------- -------- ---------
SUBTL 48.433 0.000 36.381 0.000 654.863 30.124 227.681 0.000 397.059 250.838
AFTER 7.780 0.000 5.791 0.000 104.241 4.795 65.50 0.000 33.878 5.992
TOTAL 56.212 0.000 42.172 0.000 759.104 34.919 293.249 0.000 430.936 256.830
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 256.830 M$
TOTAL NET LIQ REVENUE 759.104 M$ 9% 267.901 M$
12% 237.178 M$
15% 212.726 M$
20% 181.605 M$
</TABLE>
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION
---------------------- ------------------ NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
LEASE NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
- ------------------------- --------- ---------- --------- --------- -------- ---------- ---------- --------- --------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NOE, H.H. #1 25.288 0.000 18.729 0.000 337.124 130.168 0.000 206.957 109.514 25
PLOCHER-RAPPE-
TURNER #1-B 4.178 0.000 3.167 0.000 57.012 34.880 0.000 22.132 18.155 06
RAPPE-TURNER #1A 17.391 0.000 13.184 0.000 237.318 97.719 0.000 139.600 87.720 19
REPUBLIC INS, #3 9.354 0.000 7.092 0.000 127.650 65.402 0.000 62.248 41.441 15
- ------------------------- -------- -------- ------- ------- -------- ---------- --------- -------- -------- --
MANZIEL. QUITMAN &
MISC. WOOD 56.212 0.000 42.172 0.000 759.104 328.168 0.000 430.936 256.830
</TABLE>
RESULTS SAVED UNDER: MANZELPP
<PAGE> 83
<TABLE>
<CAPTION>
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. NOE, H. H. #1
PROVED PRODUCING RESERVES MANZIEL (SUB-CLARKSVILLE) FIELD
WOOD COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
GROSS PRODUCTION NET PRODUCTION
YEAR END --------------------- -------------------- OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- --------- --------- --------- ---- ----- -------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.995 0.000 0.737 0.000 18.00 0.00 13.261 0.610 2.340 0.000 10.311 10.071
12 2000 1.884 0.000 1.396 0.000 18.00 0.00 25.122 1.156 4.680 0.000 19.286 16.717
12 2001 1.771 0.000 1.312 0.000 18.00 0.00 23.615 1.086 4.680 0.000 17.848 14.064
12 2002 1.665 0.000 1.233 0.000 18-00 0.00 22.198 1.021 4.680 0.000 16.497 11.817
12 2003 1.565 0.000 1.159 0.000 18.00 0.00 20.866 0.960 4.680 0.000 15.226 9.916
12 2004 1.471 0.000 1.090 0.000 18.00 0.00 19.614 0.902 4.680 0.000 14.032 8.307
12 2005 1.383 0.000 1.024 0.000 18.00 0.00 18.437 0.848 4.680 0.000 12.909 6.948
12 2006 1.300 0.000 0.963 0.000 18.00 0.00 17.331 0.797 4.680 0.000 11.854 5.800
12 2007 1.222 0.000 0.905 0.000 18.00 0.00 16.291 0.749 4.680 0.000 10.862 4.831
12 2008 1.149 0.000 0.851 0.000 18.00 0.00 15.314 0.704 4.680 0.000 9.929 4.015
12 2009 1.080 0.000 0.800 0.000 18.00 0.00 14.395 0.662 4.680 0.000 9.053 3.328
12 2010 1.015 0.000 0.752 0.000 18.00 0.00 13.531 0.622 4.680 0.000 8.229 2.750
12 2011 0.954 0.000 0.707 0.000 18.00 0.00 12.719 0.585 4.680 0.000 7.454 2.265
12 2012 0.897 0.000 0.664 0.000 18.00 0.00 11.956 0.550 4.680 0.000 6.726 1.858
12 2013 0.843 0.000 0.624 0.000 18.00 0.00 11.239 0.517 4.680 0.000 6.042 1.517
- -------- --------- -------- --------- --------- --------- ----- --------- --------- -------- ------- -------- --------
SUBTL 19.195 0.000 14.216 0.000 255.887 11.771 67.860 0.000 176.256 104.203
AFTER 6.094 0.000 4.513 0.000 81.237 3.737 46.800 0.000 30.700 5.311
TOTAL 25.288 0.000 18.729 0.000 18.00 0.00 337.124 15.508 114.660 0.000 206.956 109.514
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 109.514 M$
INITIAL NET GAS INTEREST 74.062500% 9% 115.238 M$
INITIAL NET OIL INTEREST 74.062500% 12% 99.537 M$
15% 87.465 M$
FINAL WORKING INTEREST 97.500000% 20% 72.676 M$
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 337.124 M$
FILE NAME: NOE1
REMAINING LIFE OF PROJECT IS 25 YEARS
DIRECTORY: TEXEAST
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. PLOCHER-RAPPE-TURNER #1-B
PROVED PRODUCING RESERVES QUITMAN (SUB-CLARKSVILLE) FIELD
WOOD COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
GROSS PRODUCTION NET PRODUCTION
YEAR END --------------------- -------------------- OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- --------- -------- ----------- ------ ----- ---------- ---------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.562 0.000 0.426 0.000 18.00 0.00 7.668 0.353 2.933 0.000 4.383 4.281
12 2000 0.975 0.000 0.739 0.000 18.00 0.00 13.305 0.612 5.865 0.000 6.828 5.918
12 2001 0.829 0.000 0.628 0.000 18.00 0.00 11.309 0.520 5.865 0.000 4.924 3.880
12 2002 0.704 0.000 0.534 0.000 18.00 0.00 9.613 0.442 5.865 0.000 3.306 2.368
12 2003 0.599 0.000 0.454 0.000 18.00 0.00 8.171 0.376 5.865 0.000 1.930 1.257
12 2004 0.509 0.000 0.386 0.000 18.00 0.00 6.945 0.319 5.865 0.000 0.761 0.450
12 2005 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2006 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2007 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2008 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2009 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2010 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2011 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- -------- -------- -------- ------- -------- ------- ----- -------- --------- -------- -------- -------- -------
SUBTL 4.178 0.000 3.167 0.000 57.012 2.623 32.258 0.000 22.132 18.155
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 4.178 0.000 3.167 0.000 18.00 0.00 57.012 2.623 32.258 0.000 22.132 18.155
INITIAL WORKING INTEREST 97.750000% NET PRESENT VALUE AT 10% 18.155 M$
INITIAL NET GAS INTEREST 75.810000% 9% 18.489 M$
INITIAL NET OIL INTEREST 75.810000% 12% 17.523 M$
15% 16.653 M$
FINAL WORKING INTEREST 97.750000% 20% 15.383 M$
FINAL NET GAS INTEREST 75.810000%
FINAL NET OIL INTEREST 75.810000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 57.012 M$
FILE NAME: PLOCH
REMAINING LIFE OF PROJECT IS 6 YEARS
DIRECTORY: TEXEAST
</TABLE>
<PAGE> 85
.
<TABLE>
<CAPTION>
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. RAPPE-TURNER #1-A
PROVED PRODUCING RESERVES QUITMAN (EAGLE FORD) FIELD
WOOD COUNTY. TEXAS
GULFTEX, INC.
AS OF 07/01/99
GROSS PRODUCTION NET PRODUCTION
YEAR END --------------------- -------------------- OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@ 10%
- -------- ---------- --------- -------- ----------- ------ ----- ---------- ---------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.982 0.000 0.744 0.000 18.00 0.00 13.397 0.616 2.346 0.000 10.435 10.192
12 2000 1.808 0.000 1.371 0.000 18.00 0.00 24.671 1.135 4.692 0.000 18.844 16.334
12 2001 1.645 0.000 1.247 0.000 18.00 0.00 22.450 1.033 4.692 0.000 16.726 13.180
12 2002 1.497 0.000 1.135 0.000 18.00 0.00 20.430 0.940 4.692 0.000 14.798 10.601
12 2003 1.362 0.000 1.033 0.000 18.00 0.00 18.591 0.855 4.692 0.000 13.044 8.495
12 2004 1.240 0.000 0.940 0.000 18.00 0.00 16.918 0.778 4.692 0.000 11.448 6.777
12 2005 1.128 0.000 0.855 0.000 18.00 0.00 15.395 0.708 4.692 0.000 9.995 5.379
12 2006 1.027 0.000 0.778 0.000 18.00 0.00 14.010 0.644 4.692 0.000 8.673 4.244
12 2007 0.934 0.000 0.708 0.000 18.00 0.00 12.749 0.586 4.692 0.000 7.470 3.323
12 2008 0.850 0.000 0.645 0.000 18.00 0.00 11.601 0.534 4.692 0.000 6.376 2.578
12 2009 0.774 0.000 0.587 0.000 18.00 0.00 10.557 0.486 4.692 0.000 5.380 1.978
12 2010 0.704 0.000 0.534 0.000 18.00 0.00 9.607 0.442 4.692 0.000 4.473 1.495
12 2011 0.641 0.000 0.486 0.000 18.00 0.00 8.743 0.402 4.692 0.000 3.648 1.108
12 2012 0.583 0.000 0.442 0.000 18.00 0.00 7.956 0.366 4.692 0.000 2.898 0.800
12 2013 0.531 0.000 0.402 0.000 18.00 0.00 7.240 0.333 4.692 0.000 2.215 0.556
- -------- --------- --------- -------- --------- ------- ----- -------- -------- -------- ------- --------- -------
SUBTL 15.706 0.000 11.906 0.000 214.315 9.858 68.034 0.000 136.422 87.039
AFTER 1.686 0.000 1.278 0.000 23.003 1.058 18.768 0.000 3.177 0.681
TOTAL 17.391 0.000 13.184 0.000 18.00 0.00 237.318 10.917 86.802 0.000 139.600 87.720
INITIAL WORKING INTEREST 97.750000% NET PRESENT VALUE AT 10% 87.720 M$
INITIAL NET GAS INTEREST 75.810000% 9% 91.244 M$
INITIAL NET OIL INTEREST 75.810000% 12% 81.386 M$
15% 73.365 M$
FINAL WORKING INTEREST 97.750000% 20% 62.946 M$
FINAL NET GAS INTEREST 75.810000%
FINAL NET OIL INTEREST 75.810000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 237.318 M$
FILE NAME: RAPPEIA
REMAINING LIFE OF PROJECT IS 19 YEARS
DIRECTORY: TEXEAST
</TABLE>
<PAGE> 86
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. REPUBLIC INSURANCE CO. #3
PROVED PRODUCING RESERVES QUITMAN (DERR) FIELD
WOOD COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- -------- --------- -------- -------- ---- ----- ---------- ---------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL INVESTMENT 0.000 0.000 0.000
12 1999 0.567 0.000 0.430 0.000 18.00 0.00 7.740 0.356 2.053 0.000 5.331 5.207
12 2000 1.050 0.000 0.796 0.000 18.00 0.00 14.322 0.659 4.105 0.000 9.557 8.284
12 2001 0.960 0.000 0.728 0.000 18.00 0.00 13.104 0.603 4.105 0.000 8.396 6.616
12 2002 0.879 0.000 0.666 0.000 18.00 0.00 11.991 0.552 4.105 0.000 7.333 5.253
12 2003 0.804 0.000 0.610 0.000 18.00 0.00 10.971 0.505 4.105 0.000 6.361 4.143
12 2004 0.736 0.000 0.558 0.000 18.00 0.00 10.039 0.462 4.105 0.000 5.471 3.239
12 2005 0.673 0.000 0.510 0.000 18.00 0.00 9.185 0.423 4.105 0.000 4.657 2.507
12 2006 0.616 0.000 0.467 0.000 18.00 0.00 8.405 0.387 4.105 0.000 3.913 1.914
12 2007 0.564 0.000 0.427 0.000 18.00 0.00 7.690 0.354 4.105 0.000 3.231 1.437
12 2008 0.516 0.000 0.391 0.000 18.00 0.00 7.037 0.324 4.105 0.000 2.607 1.054
12 2009 0.472 0.000 0.358 0.000 18.00 0.00 6.439 0.296 4.105 0.000 2.037 0.749
12 2010 0.432 0.000 0.327 0.000 18.00 0.00 5.891 0.271 4.105 0.000 1.515 0.506
12 2011 0.395 0.000 0.299 0.000 18.00 0.00 5.390 0.248 4.105 0.000 1.037 0.315
12 2012 0.361 0.000 0.274 0.000 18.00 0.00 4.932 0.227 4.105 0.000 0.600 0.166
12 2013 0.331 0.000 0.251 0.000 18.00 0.00 4.513 0.208 4.105 0.000 0.200 0.050
- -------- --------- -------- -------- -------- ------ ----- -------- ------- -------- ------- --------- --------
SUBTL 9.354 O.000 7.092 0.000 127.650 5.872 59.530 0.000 62.248 41.441
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 9.354 0.000 7.092 0.000 18.00 0.00 127.650 5.872 59.530 0.000 62.248 41.441
INITIAL WORKING INTEREST 97.750000 % NET PRESENT VALUE AT 10% 41.441 M$
INITIAL NET GAS INTEREST 75.810000 % 9% 42.930 M$
INITIAL NET OIL INTEREST 75.810000 % 12% 38.733 M$
15% 35.243 M$
FINAL WORKING INTEREST 97.750000 % 20% 30.600 M$
FINAL NET GAS INTEREST 75.810000 %
FINAL NET OIL INTEREST 75.810000 % TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 127.650 M$
FILE NAME: REPUB
REMAINING LIFE OF PROJECT IS 15 YEARS
DIRECTORY: TEXEAST
</TABLE>
<PAGE> 87
MANZIEL, QUITMAN & MISCELLANEOUS
WOOD COUNTY FIELDS
PROVED NON-PRODUCING RESERVES
82
<PAGE> 88
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
SUMMARY MANZIEL, QUITMAN & MISC. WOOD CO. FIELD
PROVED NON-PRODUCING RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION NET OPER SEVR.AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL(MBBL) GAS(MMCF) OIL(MBBL) GAS(MMCF) REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- --------- --------- --------- --------- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 9.699 0.000 7.231 0.000 130.153 5.987 45.549 277.700 (199.083) (194.451)
12 2000 18.211 0.000 13.578 0.000 244.396 11.242 91.098 0.000 142.056 123.132
12 2001 16.939 0.000 12.630 0.000 227.339 10.458 91.098 0.000 125.783 99.115
12 2002 15.761 0.000 11.752 0.000 211.535 9.731 91.098 0.000 110.706 79.304
12 2003 14.669 0.000 10.938 0.000 196.887 9.057 91.098 0.000 96.732 62.995
12 2004 13.657 0.000 10.184 0.000 183.307 8.432 91.098 0.000 83.777 49.598
12 2005 12.718 0.000 9.484 0.000 170.713 7.853 91.098 0.000 71.762 38.623
12 2006 11.847 0.000 8.835 0.000 159.031 7.315 91.098 0.000 60.617 29.659
12 2007 11.039 0.000 8.233 0.000 148.190 6.817 91.098 0.000 50.276 22.362
12 2008 9.454 0.000 7.055 0.000 126.996 5.842 79.398 0.000 41.756 16.885
12 2009 8.841 0.000 6.598 0.000 118.768 5.463 79.398 0.000 33.907 12.464
12 2010 8.270 0.000 6.172 0.000 111.094 5.110 79.398 0.000 26.586 8.884
12 2011 6.832 0.000 5.104 0.000 91.870 4.226 67.698 0.000 19.946 6.060
12 2012 4.892 0.006 3.657 0.000 65.832 3.028 47.793 0.000 15.011 4.146
12 2013 4.581 0.000 3.425 0.000 61.649 2.836 47.793 0.000 11.020 2.767
- ------- ------- ----- ------- ----- -------- ------- -------- ------- -------- --------
SUBTL 167.411 0.000 124.876 0.000 2247.760 103.397 1175.811 277.700 690.852 361.543
AFTER 9.501 0.000 7.093 0.000 127.677 5.873 107.508 0.000 14.296 3.039
TOTAL 176.912 0.000 131.969 0.000 2375.437 109.270 1283.319 277.700 705.148 364.582
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TOTAL NET GAS REVENUE 0.000 M$ NET PRESENT WORTH AT 10% 364.582 NS
TOTAL NET LIQ REVENUE 2375.437 M$ 9% 388.100 M$
12% 322.168 M$
15% 268.212 NS
20% 197.757 M$
</TABLE>
<PAGE> 89
SUMMARY MANZIEL, QUITMAN & MISC. WOOD CO. FIELD
PROVED NON-PRODUCING RESERVES
AS OF 07/01/99
<TABLE>
<CAPTION>
GROSS PRODUCTION NET PRODUCTION NET OPER OPER EXP TOTAL CASH FLOW DISC CASH LF
LEASE NAME OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) REVENUE +TAXES INVST(M$) (M$) FLOW@10% YR
- ------------------------- ---------- ---------- ---------- ---------- ------- ------ --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HUDSON 18.214 0.000 13.490 0.000 242.812 145.719 29.250 67.843 39.591 12
HUDSON, M.A. etal UNIT #1 34.352 0.000 25.442 0.000 457.960 226.401 29.250 202.309 111.960 20
HUDSON. N.A. UNIT A #1 12.112 0.000 8.971 0.000 161.470 106.878 29.250 25.342 13.415 09
HUDSON, M.A. UNIT B #2 19.650 0.000 14.553 0.000 261.960 187.550 29.250 45.160 21.850 13
McDADE-CURRY UNIT #1 17.931 0.000 13.740 0.000 247.320 153.481 14.325 79.514 44.171 16
McELYEA. J.H. #1A 26.562 0.000 19.673 0.000 54.106 233.909 48.750 71.447 28.632 13
MOSELEY. W.A. #1 20.402 0.000 15.110 0.000 71.986 139.456 48.750 83.780 38.745 16
RAPPE-TURNER #3 18.403 0.000 13.951 0.000 51.118 120.054 29.325 101.739 52.244 19
TURNER, RAPPE #1 9.285 0.000 7.039 0.000 26.706 79.141 19.550 28.015 13.974 13
------- ----- ------- ----- -------- -------- ------- -------- ------- --
MANZIEL, QUITMAN &
MISC. WOOD 176.912 0.000 131.969 0.000 2375.437 1392.589 277.700 705.148 364.582
</TABLE>
RESULTS SAVED UNDER: MANZELNP
<PAGE> 90
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. HUDSON
PROVED NON-PRODUCING RESERVES MANZIEL (SUB-CLARKSVILLE FB A) FIELD
WOOD COUNTY, TEXAS
TEXEAST OPERATING CO.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- -------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 1.218 0.000 0.902 0.000 18.00 0.00 16.239 0.747 5.850 29.250 (19.608) (19.151)
12 2000 2.265 0.000 1.677 0.000 18.00 0.00 30.191 1.389 11.700 0.000 17.103 14.824
12 2001 2.084 0.000 1.543 0.000 18.00 0.00 27.776 1.278 11.700 0.000 14.798 11.661
12 2002 1.917 0.000 1.420 0.000 18.00 0.00 25.554 1.175 11.700 0.000 12.679 9.082
12 2003 1.764 0.000 1.306 0.000 18.00 0.00 23.510 1.081 11.700 0.000 10.728 6.987
12 2004 1.622 0.000 1.202 0.000 18.00 0.00 21.629 0.995 11.700 0.000 8.934 5.289
12 2005 1.493 0.000 1.105 0.000 18.00 0.00 19.899 0.915 11.700 0.000 7.283 3.920
12 2006 1.373 0.000 1.017 0.000 18.00 0.00 18.307 0.842 11.700 0.000 5.765 2.820
12 2007 1.263 0.000 0.936 0.000 18.00 0.00 16.842 0.775 11.700 0.000 4.367 1.943
12 2008 1.162 0.000 0.861 0.000 18.00 0.00 15.495 0.713 11.700 0.000 3.082 1.246
12 2009 1.069 0.000 0.792 0.000 18.00 0.00 14.255 0.656 11.700 0.000 1.899 0.698
12 2010 0.984 0.000 0.729 0.000 18.00 0.00 13.115 0.603 11.700 0.000 0.812 0.271
12 2011 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ ------- -------
SUBTL 18.214 0.000 13.490 0.000 242.812 11.169 134.550 29.250 67.843 39.591
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 18.214 0.000 13.490 0.000 18.00 0.00 242.812 11.169 134.550 29.250 67.843 39.591
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 39.591 M$
INITIAL NET GAS INTEREST 74.062500% 9% 41.692 M$
INITIAL NET OIL INTEREST 74.062500% 12% 35.734 M$
15% 30.698 M$
FINAL WORKING INTEREST 97.500000% 20% 23.884 M$
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 242.812 M$
</TABLE>
FILE NAME: HUDSON
REMAINING LIFE OF PROJECT IS 12 YEARS
DIRECTORY: TEXEAST
<PAGE> 91
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. HUDSON, M.A. etal UNIT #1
PROVED NON-PRODUCING RESERVES MANZIEL FIELD
WOOD COUNTY, TEXAS
TEXEAST OPERATING
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 1.631 0.000 1.208 0.000 18.00 0.00 21.747 1.000 5.265 29.250 (13.768) (13.448)
12 2000 3.062 0.000 2.268 0.000 18.00 0.00 40.815 1.877 10.530 0.000 28.408 24.623
12 2001 2.847 0.000 2.109 0.000 18.00 0.00 37.958 1.746 10.530 0.000 25.682 20.237
12 2002 2.648 0.000 1.961 0.000 18.00 0.00 35.301 1.624 10.530 0.000 23.147 16.581
12 2003 2.463 0.000 1.824 0.000 18.00 0.00 32.830 1.510 10.530 0.000 20.790 13.539
12 2004 2.290 0.000 1.696 0.000 18.00 0.00 30.532 1.404 10.530 0.000 18.597 11.010
12 2005 2.130 0.000 1.577 0.000 18.00 0.00 28.395 1.306 10.530 0.000 16.558 8.912
12 2006 1.981 0.000 1.467 0.000 18.00 0.00 26.407 1.215 10.530 0.000 14.662 7.174
12 2007 1.842 0.000 1.364 0.000 18.00 0.00 24.558 1.130 10.530 0.000 12.899 5.737
12 2008 1.713 0.000 1.269 0.000 18.00 0.00 22.839 1.051 10.530 0.000 11.259 4.553
12 2009 1.593 0.000 1.180 0.000 18.00 0.00 21.241 0.977 10.530 0.000 9.733 3.578
12 2010 1.482 0.000 1.097 0.000 18.00 0.00 19.754 0.909 10.530 0.000 8.315 2.779
12 2011 1.378 0.000 1.021 0.000 18.00 0.00 18.371 0.845 10.530 0.000 6.996 2.125
12 2012 1.282 0.000 0.949 0.000 18.00 0.00 17.086 0.786 10.530 0.000 5.769 1.593
12 2013 1.192 0.000 0.883 0.000 18.00 0.00 15.889 0.731 10.530 0.000 4.628 1.162
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ -------- ------
SUBTL 29.534 0.000 21.873 0.000 393.721 18.111 152.685 29.250 193.675 110.1
AFTER 4.819 0.000 3.569 0.000 64.239 2.956 52.650 0.000 8.634 1.8
TOTAL 34.352 0.000 25.442 0.000 18.00 0.00 457.960 21.066 205.335 29.250 202.309 111.9
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 111.960 M$
INITIAL NET GAS INTEREST 74.062500% 9% 117.930 M$
INITIAL NET OIL INTEREST 74.062500% 12% 101.304 M$
15% 87.956 M$
FINAL WORKING INTEREST 97.500000% 20% 70.883 M$
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
T TOTAL OIL REVENUE 457.960 M$
</TABLE>
FILE NAME: HUD
REMAINING LIFE OF PROJECT IS 20 YEARS.
DIRECTORY: TEXEAST
<PAGE> 92
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. HUDSON, M.A. UNIT -A- #1
PROVED NON-PRODUCING RESERVES MANZIEL FIELD
WOOD COUNTY. TEXAS
TEXEAST OPERATING
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@10%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 1.064 0.000 0.788 0.000 18.00 0.00 14.180 0.652 5.850 29.250 (21.572) (21.070)
12 2000 1.940 0.000 1.437 0.000 18.00 0.00 25.862 1.190 11.700 0.000 12.972 11.244
12 2001 1.746 0.000 1.293 0.000 18.00 0.00 23.275 1.071 11.700 0.000 10.505 8.278
12 2002 1.571 0.000 1.164 0.000 18.00 0.00 20.948 0.964 11.700 0.000 8.284 5.934
12 2003 1.414 0.000 1.047 0.000 18.00 0.00 18.853 0.867 11.700 0.000 6.286 4.093
12 2004 1.273 0.000 0.943 0.000 18.00 0.00 16.968 0.781 11.700 0.000 4.487 2.657
12 2005 1.146 0.000 0.848 0.000 18.00 0.00 15.271 0.702 11.700 0.000 2.868 1.544
12 2006 1.031 0.000 0.764 0.000 18.00 0.00 13.744 0.632 11.700 0.000 1.412 0.691
12 2007 0.928 0.000 0.687 0.000 18.00 0.00 12.369 0.569 11.700 0.000 0.100 0.045
12 2008 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2009 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2010 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2011 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ------ ----- ----- ----- ----- ---- ------- ----- ------ ------ ------- -------
SUBTL 12.112 0.000 8.971 0.000 161.470 7.428 99.450 29.250 25.342 13.415
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 12.112 0.000 8.971 0.000 18.00 0.00 161.470 7.428 99.450 29.250 25.342 13.415
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 13.415 M$
INITIAL NET GAS INTEREST 74.062500% 9% 14.362 M$
INITIAL NET OIL INTEREST 74.062500% 12% 11.646 M$
15% 9.274 M$
FINAL WORKING INTEREST 97.500000% 20% 5.943 M$
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 161.470 M$
</TABLE>
FILE NAME: HUDA
REMAINING LIFE OF PROJECT IS 9 YEARS
DIRECTORY: TEXEAST
<PAGE> 93
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. HUDSON, M.A. UNIT -B- #2
PROVED NON-PRODUCING RESERVES MANZIEL FIELD
WOOD COUNTY, TEXAS
TEXEAST OPERATING
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 1.058 0.000 0.783 0.000 18.00 0.00 14.101 0.649 7.020 29.250 (22.818) (22.287)
12 2000 2.022 0.000 1.498 0.000 18.00 0.00 26.962 1.240 14.040 0.000 11.682 10.126
12 2001 1.921 0.000 1.423 0.000 18.00 0.00 25.614 1.178 14.040 0.000 10.396 8.192
12 2002 1.825 0.000 1.352 0.000 18.00 0.00 24.333 1.119 14.040 0.000 9.174 6.572
12 2003 1.734 0.000 1.284 0.000 18.00 0.00 23.117 1.063 14.040 0.000 8.013 5.219
12 2004 1.647 0.000 1.220 0.000 18.00 0.00 21.961 1.010 14.040 0.000 6.911 4.019
12 2005 1.565 0.000 1.159 0.000 18.00 0.00 20.863 0.960 14.040 0.000 5.863 3.156
12 2006 1.487 0.000 1.101 0.000 18.00 0.00 19.820 0.912 14.040 0.000 4.868 2.382
12 2007 1.412 0.000 1.046 0.000 18.00 0.00 18.829 0.866 14.040 0.000 3.923 1.745
12 2008 1.342 0.000 0.994 0.000 18.00 0.00 17.887 0.823 14.040 0.000 3.025 1.223
12 2009 1.275 0.000 0.944 0.000 18.00 0.00 16.993 0.782 14.040 0.000 2.171 0.798
12 2010 1.211 0.000 0.897 0.000 18.00 0.00 16.143 0.743 14.040 0.000 1.361 0.455
12 2011 1.150 0.000 0.852 0.000 18.00 0.00 15.336 0.705 14.040 0.000 0.591 0.179
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ ------- -------
SUBTL 19.650 0.000 14.553 0.000 261.960 12.050 175.500 29.250 45.160 21.850
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 19.650 0.000 14.553 0.000 18.00 0.00 261.960 12.050 175.500 29.250 45.160 21.850
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 21.850
INITIAL NET GAS INTEREST 74.062500% 9% 23.539
INITIAL NET OIL INTEREST 74.062500% 12% 18.774
15% 14.801
FINAL WORKING INTEREST 97.500000% 20% 9.512
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 261.960 M$
</TABLE>
FILE NAME: HUDB
REMAINING LIFE OF PROJECT IS 13 YEARS
DIRECTORY: TEXEAST
<PAGE> 94
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. McDADE-CURRY UNIT #1
PROVED NON-PRODUCING RESERVES MERIGALE-PAUL FIELD
WOOD COUNTY, TEXAS
TEXEAST OPERATING
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 0.828 0.000 0.635 0.000 18.00 0.00 11.422 0.525 4.584 14.325 (8.012) (7.826)
12 2000 1.593 0.000 1.221 0.000 18.00 0.00 21.976 1.011 9.168 0.000 11.797 10.226
12 2001 1.514 0.000 1.160 0.000 18.00 0.00 20.877 0.960 9.168 0.000 10.749 8.470
12 2002 1.438 0.000 1.102 0.000 18.00 0.00 19.834 0.912 9.168 0.000 9.753 6.987
12 2003 1.366 0.000 1.047 0.000 18.00 0.00 18.842 0.867 9.168 0.000 8.807 5.735
12 2004 1.298 0.000 0.994 0.000 18.00 0.00 17.900 0.823 9.168 0.000 7.908 4.682
12 2005 1.233 0.000 0.945 0.000 18.00 0.00 17.005 0.782 9.168 0.000 7.055 3.797
12 2006 1.171 0.000 0.897 0.000 18.00 0.00 16.155 0.743 9.168 0.000 6.243 3.055
12 2007 1.113 0.000 0.853 0.000 18.00 0.00 15.347 0.706 9.168 0.000 5.473 2.434
12 2008 1.057 0.000 0.810 0.000 18.00 0.00 14.580 0.671 9.168 0.000 4.741 1.917
12 2009 1.004 0.000 0.769 0.000 18.00 0.00 13.851 0.637 9.168 0.000 4.045 1.487
12 2010 0.954 0.000 0.731 0.000 18.00 0.00 13.158 0.605 9.168 0.000 3.385 1.131
12 2011 0.906 0.000 0.694 0.000 18.00 0.00 12.500 0.575 9.168 0.000 2.757 0.838
12 2012 0.861 0.000 0.660 0.000 18.00 0.00 11.875 0.546 9.168 0.000 2.161 0.597
12 2013 0.818 0.000 0.627 0.000 18.00 0.00 11.281 0.519 9.168 0.000 1.594 0.400
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ ------ ------
SUBTL 17.154 0.000 13.145 0.000 236.602 10.884 132.936 14.325 78.457 43.930
AFTER 0.777 0.000 0.595 0.000 10.717 0.493 9.168 0.000 1.056 0.241
TOTAL 17.931 0.000 13.740 0.000 18.00 0.00 247.319 11.377 142.104 14.325 79.514 44.171
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 95.500000% NET PRESENT VALUE AT 10% 44.171 M$
INITIAL NET GAS INTEREST 76.625000% 9% 46.566 M$
INITIAL NET OIL INTEREST 76.625000% 12% 39.875 M$
15% 34.454 M$
FINAL WORKING INTEREST 95.500000% 20% 27.460 M$
FINAL NET GAS INTEREST 76.625000%
FINAL NET OIL INTEREST 76.625000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 247.319 M$
</TABLE>
FILE NAME: MCDADE1
REMAINING LIFE OF PROJECT IS 16 YEARS
DIRECTORY: TEXEAST
<PAGE> 95
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. McELYEA, J.H. #1-A
PROVED NON-PRODUCING RESERVES MANZIEL (SUB-CLARKSVILLE FB A) FIELD
WOOD COUNTY, TEXAS
TEXEAST OPERATING
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 1.234 0.000 0.914 0.000 18.00 0.00 16.451 0.757 7.020 48.750 (40.076) (39.143)
12 2000 2.360 0.000 1.748 0.000 18.00 0.00 31.456 1.447 14.040 0.000 15.969 13.842
12 2001 2.242 0.000 1.660 0.000 18.00 0.00 29.883 1.375 14.040 0.000 14.469 11.401
12 2002 2.130 0.000 1.577 0.000 18.00 0.00 28.389 1.306 14.040 0.000 13.043 9.343
12 2003 2.023 0.000 1.498 0.000 18.00 0.00 26.970 1.241 14.040 0.000 11.689 7.612
12 2004 1.922 0.000 1.423 0.000 18.00 0.00 25.621 1.179 14.040 0.000 10.403 6.159
12 2005 1.826 0.000 1.352 0.000 18.00 0.00 24.340 1.120 14.040 0.000 9.180 4.941
12 2006 1.735 0.000 1.285 0.000 18.00 0.00 23.123 1.064 14.040 0.000 8.019 3.924
12 2007 1.648 0.000 1.220 0.000 18.00 0.00 21.967 1.010 14.040 0.000 6.916 3.076
12 2008 1.565 0.000 1.159 0.000 18.00 0.00 20.869 0.960 14.040 0.000 5.869 2.373
12 2009 1.487 0.000 1.101 0.000 18.00 0.00 19.825 0.912 14.040 0.000 4.873 1.791
12 2010 1.413 0.000 1.046 0.000 18.00 0.00 18.834 0.866 14.040 0.000 3.928 1.313
12 2011 1.342 0.000 0.994 0.000 18.00 0.00 17.892 0.823 14.040 0.000 3.029 0.920
12 2012 1.275 0.000 0.944 0.000 18.00 0.00 16.998 0.782 14.040 0.000 2.176 0.601
12 2013 1.211 0.000 0.897 0.000 18.00 0.00 16.148 0.743 14.040 0.000 1.365 0.343
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ ------- -------
SUBTL 25.411 0.000 18.820 0.000 338.766 15.583 203.580 48.750 70.852 28.496
AFTER 1.151 0.000 0.852 0.000 15.340 0.706 14.040 0.000 0.595 0.136
TOTAL 26.562 0.000 19.673 0.000 18.00 0.00 354.106 16.289 217.620 48.750 71.447 28.632
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 28.632 M$
INITIAL NET GAS INTEREST 74.062500% 9% 31.567 M$
INITIAL NET OIL INTEREST 74.062500% 12% 23.353 M$
15% 16.673 M$
FINAL WORKING INTEREST 97.500000% 20% 8.029 M$
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 354.106 M$
</TABLE>
FILE NAME: MCEL
REMAINING LIFE OF PROJECT IS 16 YEARS
DIRECTORY: TEXEAST
<PAGE> 96
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. MOSELEY, W.A. #1
PROVED NON-PRODUCING RESERVES NORMAN PAUL FIELD
WOOD COUNTY, TEXAS
TEXEAST OPERATING
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 1.160 0.000 0.859 0.000 18.00 0.00 15.466 0.711 4.095 48.750 (38.090) (37.204)
12 2000 2.157 0.000 1.597 0.000 18.00 0.00 28.754 1.323 8.190 0.000 19.241 16.678
12 2001 1.984 0.000 1.470 0.000 18.00 0.00 26.453 1.217 8.190 0.000 17.047 13.432
12 2002 1.826 0.000 1.352 0.000 18.00 0.00 24.337 1.120 8.190 0.000 15.028 10.765
12 2003 1.680 0.000 1.244 0.000 18.00 0.00 22.390 1.030 8.190 0.000 13.170 8.577
12 2004 1.545 0.000 1.144 0.000 18.00 0.00 20.599 0.948 8.190 0.000 11.461 6.785
12 2005 1.422 0.000 1.053 0.000 18.00 0.00 18.951 0.872 8.190 0.000 9.889 5.322
12 2006 1.308 0.000 0.969 0.000 18.00 0.00 17.435 0.802 8.190 0.000 8.443 4.131
12 2007 1.203 0.000 0.891 0.000 18.00 0.00 16.040 0.738 8.190 0.000 7.112 3.164
12 2008 1.107 0.000 0.820 0.000 18.00 0.00 14.757 0.679 8.190 0.000 5.888 2.381
12 2009 1.018 0.000 0.754 0.000 18.00 0.00 13.576 0.625 8.190 0.000 4.762 1.750
12 2010 0.937 0.000 0.694 0.000 18.00 0.00 12.490 0.576 8.190 0.000 3.726 1.245
12 2011 0.862 0.000 0.638 0.000 18.00 0.00 11.491 0.529 8.190 0.000 2.772 0.842
12 2012 0.793 0.000 0.587 0.000 18.00 0.00 10.572 0.486 8.190 0.000 1.895 0.523
12 2013 0.730 0.000 0.540 0.000 18.00 0.00 9.726 0.447 8.190 0.000 1.089 0.273
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ ------- -------
SUBTL 19.731 0.000 14.613 0.000 263.038 12.100 118.755 48.750 83.434 38.666
AFTER 0.671 0.000 0.497 0.000 8.948 0.412 8.190 0.000 0.346 0.079
TOTAL 20.402 0.000 15.110 0.000 18.00 0.00 271.986 12.511 126.945 48.750 83.780 38.745
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.500000% NET PRESENT VALUE AT 10% 38.745 M$
INITIAL NET GAS INTEREST 74.062500% 9% 41.886 M$
INITIAL NET OIL INTEREST 74.062500% 12% 33.072 M$
15% 25.840 M$
FINAL WORKING INTEREST 97.500000% 20% 16.384 M$
FINAL NET GAS INTEREST 74.062500%
FINAL NET OIL INTEREST 74.062500% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 271.986 M$
</TABLE>
FILE NAME: MOSE
REMAINING LIFE OF PROJECT IS 16 YEARS
DIRECTORY: TEXEAST
<PAGE> 97
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. RAPPE-TURNER #3
PROVED NON-PRODUCING RESERVES QUITMAN (SUB-CLARKSVILLE) FIELD
WOW COUNTY. TEXAS
GULFTEX, INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 0.930 0.000 0.705 0.000 18.00 0.00 12.692 0.584 2.933 29.325 (20.149) (19.680)
12 2000 1.737 0.000 1.317 0.000 18.00 0.00 23.709 1.091 5.865 0.000 16.754 14.522
12 2001 1.607 0.000 1.218 0.000 18.00 0.00 21.931 1.009 5.865 0.000 15.057 11.865
12 2002 1.487 0.000 1.127 0.000 18.00 0.00 20.286 0.933 5.865 0.000 13.488 9.662
12 2003 1.375 0.000 1.042 0.000 18.00 0.00 18.765 0.863 5.865 0.000 12.037 7.839
12 2004 1.272 0.000 0.964 0.000 18.00 0.00 17.357 0.798 5.865 0.000 10.694 6.331
12 2005 1.177 0.000 0.892 0.000 18.00 0.00 16.056 0.739 5.865 0.000 9.452 5.087
12 2006 1.088 0.000 0.825 0.000 18.00 0.00 14.851 0.683 5.865 0.000 8.303 4.063
12 2007 1.007 0.000 0.763 0.000 18.00 0.00 13.738 0.632 5.865 0.000 7.241 3.221
12 2008 0.931 0.000 0.706 0.000 18.00 0.00 12.707 0.585 5.865 0.000 6.258 2.530
12 2009 0.861 0.000 0.653 0.000 18.00 0.00 11.754 0.541 5.865 0.000 5.348 1.966
12 2010 0.797 0.000 0.604 0.000 18.00 0.00 10.873 0.500 5.865 0.000 4.507 1.506
12 2011 0.737 0.000 0.559 0.000 18.00 0.00 10.057 0.463 5.865 0.000 3.729 1.133
12 2012 0.682 0.000 0.517 0.000 18.00 0.00 9.303 0.428 5.865 0.000 3.010 0.831
12 2013 0.631 0.000 0.478 0.000 18.00 0.00 8.605 0.396 5.865 0.000 2.344 0.589
- ------- ------ ----- ------ ----- ----- ---- ------- ------ ------- ------ -------- -------
SUBTL 16.319 0.000 12.371 0.000 222.685 10.244 85.043 29.325 98.074 51.465
AFTER 2.084 0.000 1.580 0.000 28.433 1.308 23.460 0.000 3.665 0.779
TOTAL 18.403 0.000 13.951 0.000 18.00 0.00 251.118 11.551 108.502 29.325 101.739 52.244
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.750000% NET PRESENT VALUE AT 10% 52.244 M$
INITIAL NET GAS INTEREST 75.810000% 9% 55.550 M$
INITIAL NET OIL INTEREST 75.810000% 12% 46.329 M$
15% 38.897 M$
FINAL WORKING INTEREST 97.750000% 20% 29.355 M$
FINAL NET GAS INTEREST 75.810000%
FINAL NET OIL INTEREST 75.810000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 251.118 M$
</TABLE>
FILE NAME: RAPPE3
REMAINING LIFE OF PROJECT IS 19 YEARS
DIRECTORY: TEXEAST
<PAGE> 98
OIL AND GAS LEASE ECONOMIC ANALYSIS
BEFORE FEDERAL INCOME TAX
TEXEAST OPERATING CO. TURNER, RAPPE #1
PROVED NDN-PRODUCING RESERVES QUITMAN. N.W. (PALUXY) FIELD
WOOD COUNTY, TEXAS
GULFTEX, INC.
AS OF 07/01/99
<TABLE>
<CAPTION>
YEAR END GROSS PRODUCTION NET PRODUCTION OIL GAS NET OPER SEVR. AND NET OPER TOTAL CASH FLOW DISC CASH
MO. YEAR OIL (MBBL) GAS (MMCF) OIL(MBBL) GAS(MMCF) $BBL $MCF REVENUE ADV. TAX EXPENSE INVST(M$) (M$) FLOW@1O%
- -------- ---------- ---------- --------- --------- ---- ---- ------- -------- ------- --------- --------- --------
INITIAL INVESTMENT 0.000 0.000 0.000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 1999 0.576 0.000 0.436 0.000 18.00 0.00 7.853 0.361 2.933 19.550 (14.990) (14.641)
12 2000 1.075 0.000 0.815 0.000 18.00 0.00 14.670 0.675 5.865 0.000 8.130 7.047
12 2001 0.994 0.000 0.754 0.000 18.00 0.00 13.570 0.624 5.865 0.000 7.081 5.579
12 2002 0.920 0.000 0.697 0.000 18.00 0.00 12.552 0.577 5.865 0.000 6.110 4.377
12 2003 0.851 0.000 0.645 0.000 18.00 0.00 11.611 0.534 5.865 0.000 5.212 3.394
12 2004 0.787 0.000 0.597 0.000 18.00 0.00 10.740 0.494 5.865 0.000 4.381 2.594
12 2005 0.728 0.000 0.552 0.000 18.00 0.00 9.934 0.457 5.865 0.000 3.612 1.944
12 2006 0.673 0.000 0.511 0.000 18.00 0.00 9.189 0.423 5.865 0.000 2.902 1.420
12 2007 0.623 0.000 0.472 0.000 18.00 0.00 8.500 0.391 5.865 0.000 2.244 0.998
12 2008 0.576 0.000 0.437 0.000 18.00 0.00 7.863 0.362 5.865 0.000 1.636 0.661
12 2009 0.533 0.000 0.404 0.000 18.00 0.00 7.273 0.335 5.865 0.000 1.073 0.395
12 2010 0.493 0.000 0.374 0.000 18.00 0.00 6.727 0.309 5.865 0.000 0.553 0.185
12 2011 0.456 0.000 0.346 0.000 18.00 0.00 6.223 0.286 5.865 0.000 0.072 0.022
12 2012 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 0.000
12 2013 0.000 0.000 0.000 0.000 0.00 0.00 0.000 0.000 0.0(0 0.000 0.000 0.000
- ------- ----- ----- ----- ----- ----- ---- ------- ----- ------ ------ ------- -------
SUBTL 9.285 0.000 7.039 0.000 126.706 5.828 73.313 19.550 28.015 13.974
AFTER 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
TOTAL 9.285 0.000 7.039 0.000 18.00 0.00 126.706 5.828 73.313 19.550 28.015 13.974
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INITIAL WORKING INTEREST 97.750000% NET PRESENT VALUE AT 10% 13.974 M$
INITIAL NET GAS INTEREST 75.810000% 9% 15.008 M$
INITIAL NET OIL INTEREST 75.810000% 12% 12.081 MS
15% 9.619 M$
FINAL WORKING INTEREST 97.750000% 20% 6.309 MS
FINAL NET GAS INTEREST 75.810000%
FINAL NET OIL INTEREST 75.810000% TOTAL GAS REVENUE 0.000 M$
TOTAL OIL REVENUE 126.706 M$
</TABLE>
FILE NAME: TURNER
REMAINING LIFE OF PROJECT IS 13 YEARS
DIRECTORY: TEXEAST
<PAGE> 99
Lease by Project
<TABLE>
<S> <C>
NE Bethany Waterflood Unit #3: Manziel Field (Pittman-Heirs):*****
NE Bethany Waterflood Unit #3 M. A. Hudson, etal Unit
Hudson
Talco Field:** M. A. Hudson Unit -A-
Hagansport Unit M. A. Hudson Unit -B-
J. H. McElyea
Mitchell Creek Field: H. H. Noe
J. L. Hedrick W. A. Moseley****
J. L. Watts J. L. Jacobs****
East Texas Field:*** North Quitman Field:
Roy H. Laird/Block 122 Ploucher-Rappe-Turner
Prothro Rappe-Turner #3
J. T. Florence Turner, Rappe #1
Rappe-Turner-1A
J. C. Whatley Project:
Republic Insurance #3****
McDade-Curry Unit****
</TABLE>
*All year to date production values are through the end of May 1999. Revenue is
recognized when received. Production is recognized when achieved. Sales of
crude oil may be delayed or combined when prices are depressed. For these
reasons revenue and production may not always correlate.
**The Hagansport Unit comprises of six individual leases; Ray Briley Lease,
Lillie J. Gallatin Lease, B. R. Grimes Lease, V. W. Jennings Lease, Myrtle P.
Haydon Lease, and Claude Nichols Lease.
***The East Texas Field Leases were included in the J. C. Whatley Project. The
working interests and net revenue interests are not equivalent, thus the
separation.
****The Republic Insurance #3 was acquired through the J. C. Whatley Project,
it is however, located in the Quitman Field. The McDade-Curry Unit was acquired
through the J. C. Whatley Project, it is however, located in the Merigale-Paul
Field. The W. A. Moseley was acquired through the Manziel/Pittman-Heirs
Projects, it is however located in the Norman-Paul Field. The J. L. Jacobs was
acquired through the Manziel/Pittman-Heirs Projects, it is however located in
the S.E. Winnsboro Field.
*****The Manziel Field Joint Venture and the Pittman-Heirs Joint Venture
encompassed separate wells on the same leases, for this reason the
Pittman-Heirs Joint Venture wells were combined with the Manziel Field Joint
Venture wells under the heading of "Manziel Field (Pittman-Heirs)" in this
summary.
94
<PAGE> 100
PRODUCTION GRAPHS
Alphabetically by Lease Name
<PAGE> 101
===================================================
GULFTEX OPERATING
BETHANY, N.E. UNIT
BETHANY, N.E. (JENKINS) FIELD
PANOLA COUNTY, TEXAS
Oil Cum: 51,060 Bbls Gas Cum: 638,563 MCF
===================================================
[GRAPH]
<PAGE> 102
- ---------- ==================================== ----------
Calculated BRILEY, RAY Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water OTO, CO. Water
TALCO FIELD - FRANKLIN COUNTY, TEXAS
- ---------- ==================================== ----------
[GRAPH]
Reported Oil Production = 363019 Bbls
Reported Gas Production = 146 Mcf
Calculated Water Production = 8873612 Bbls
<PAGE> 103
- ---------- ========================================== ----------
Calculated FLORENCE LEASE Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX OPERATING Water
EAST TEXAS (WOODBINE - GREGG COUNTY, TEXAS
- ---------- ========================================== ----------
[GRAPH]
Reported Oil Production = 180517 Bbls
Reported Gas Production = 7821 Mcf
Calculated Water Production = 834068 Bbls
<PAGE> 104
- ---------- ================================ ----------
Calculated GELLATIN, LILLIE J. #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water OTO, CO. Water
TALCO FIELD - WOOD COUNTY, TEXAS
- ---------- ================================ ----------
[GRAPH]
Reported Oil Production = 378300 Bbls
Reported Gas Production = 147 Mcf
Calculated Water Production = 11593546 Bbls
<PAGE> 105
- ---------- ==================================== ----------
Calculated GRIMES, B.R. Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water OTO, CO. Water
TALCO FIELD - FRANKLIN COUNTY, TEXAS
- ---------- ==================================== ----------
[GRAPH]
Reported Oil Production = 331917 Bbls
Reported Gas Production = 140 Mcf
Calculated Water Production = 6878321 Bbls
<PAGE> 106
- ---------- ==================================== ----------
Calculated HAGANSPORT UNIT Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water RGP PRODUCTION Water
TALCO FIELD - FRANKLIN COUNTY, TEXAS
- ---------- ==================================== ----------
[GRAPH]
Reported Oil Production = 856840 Bbls
Reported Gas Production = 172 Mcf
Calculated Water Production = 24818523 Bbls
<PAGE> 107
- ---------- ============================================ ----------
Calculated HUDSON # 1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water TEXEAST OPERATING Water
MANZIEL (SUB-CLARK.FB A) - WOOD COUNTY, TEX.
- ---------- ============================================ ----------
[GRAPH]
Reported Oil Production = 67584 Bbls
Reported Gas Production = 4237 Mcf
Calculated Water Production = 130826 Bbls
<PAGE> 108
- ---------- ============================================ ----------
Calculated HEDRICK, J.L. #1-A Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX Water
MITCHELL CREEK FIELD - HOPKINS COUNTY, TEXAS
- ---------- ============================================ ----------
[GRAPH]
Reported Oil Production = 1157052 Bbls
Reported Gas Production = 305 Mcf
Calculated Water Production = 7904088 Bbls
<PAGE> 109
- ---------- ================================= ----------
Calculated HUDSON, J.A. etal UNIT #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water TEXEAST OPERATING Water
MANZIEL FIEL - WOOD COUNTY, TEXAS
- ---------- ================================= ----------
[GRAPH]
Reported Oil Production = 298165 Bbls
Reported Gas Production = 3206 Mcf
Calculated Water Production = 366957 Bbls
<PAGE> 110
- ---------- =================================== ----------
Calculated HUDSON, M.A. UNIT -A- #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water TEXEAST OPERATING Water
MANZIEL FIELD - WOOD COUNTY, TEXAS
- ---------- =================================== ----------
[GRAPH]
Reported Oil Production = 504327 Bbls
Reported Gas Production = 11762 Mcf
Calculated Water Production = 941210 Bbls
<PAGE> 111
- ---------- ================================== ----------
Calculated HUDSON, M.A. -B- #2 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water TEXEAST OPERATING Water
MANZIEL FIELD - WOOD COUNTY, TEXAS
- ---------- ================================== ----------
[GRAPH]
Reported Oil Production = 167830 Bbls
Reported Gas Production = 7905 Mcf
Calculated Water Production = 912510 Bbls
<PAGE> 112
- ---------- ==================================== ----------
Calculated JENNINGS, V.W. Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water OTO, CO. Water
TALCO FIELD - FRANKLIN COUNTY, TEXAS
- ---------- ==================================== ----------
[GRAPH]
Reported Oil Production = 34145 Bbls
Reported Gas Production = 133 Mcf
Calculated Water Production = 875010 Bbls
<PAGE> 113
- ---------- =========================================== ----------
Calculated LAIRD, ROY H. "BLK 122" Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX OPERATING Water
EAST TEXAS (WOODBINE) - GREGG COUNTY, TEXAS
- ---------- =========================================== ----------
[GRAPH]
Reported Oil Production = 652117 Bbls
Reported Gas Production = 19762 Mcf
Calculated Water Production = 1932081 Bbls
<PAGE> 114
- ---------- ======================================== ----------
Calculated McDADE-CURRY UNIT #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water TEXEAST OPERATING CO. Water
MERIGALE-PAUL FIELD - WOOD COUNTY, TEXAS
- ---------- ======================================== ----------
[GRAPH]
Reported Oil Production = 30524 Bbls
Reported Gas Production = 153 Mcf
Calculated Water Production = 154662 Bbls
<PAGE> 115
- ---------- ============================================= ----------
Calculated McELYEA, J.H. #1-A Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX, INC. Water
MANZIEL (SUB-CLARK FB A) - WOOD COUNTY, TEXAS
- ---------- ============================================= ----------
[GRAPH]
Reported Oil Production = 107512 Bbls
Reported Gas Production = 341 Mcf
Calculated Water Production = 1056674 Bbls
<PAGE> 116
- ---------- ======================================= ----------
Calculated MOSELEY, W.A. #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water TEXEAST OPERATING Water
NORMAN PAUL FIELD - WOOD COUNTY, TEXAS
- ---------- ======================================= ----------
[GRAPH]
Reported Oil Production = 24637 Bbls
Reported Gas Production = 74 Mcf
Calculated Water Production = 14145 Bbls
<PAGE> 117
- ---------- ============================================ ----------
Calculated NOE, H.H. #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX, INC. Water
MANZIEL (SUB-CLARKSVILLE) - WOOD COUNTY, TEX
- ---------- ============================================ ----------
[GRAPH]
Reported Oil Production = 72387 Bbls
Reported Gas Production = 22198 Mcf
Calculated Water Production = 50309 Bbls
<PAGE> 118
- ---------- =========================================== ----------
Calculated PROTHRO LEASE Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX OPERATING Water
EAST TEXAS (WOODBINE) - GREGG COUNTY, TEXAS
- ---------- =========================================== ----------
[GRAPH]
Reported Oil Production = 401510 Bbls
Reported Gas Production = 384 Mcf
Calculated Water Production = 795233 Bbls
<PAGE> 119
- ---------- ============================================ ----------
Calculated PLOCHER-RAPPE-TURNER #1-B Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX, INC. Water
QUITMAN (SUB-CLARKSVILLE) - WOOD COUNTY, TEX
- ---------- ============================================ ----------
[GRAPH]
Reported Oil Production = 22487 Bbls
Reported Gas Production = 2008 Mcf
Calculated Water Production = 284940 Bbls
<PAGE> 120
- ---------- ========================================= ----------
Calculated RAPPE-TURNER -1A- #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water RGP PRODUCTION Water
QUITMAN (EAGLE FORD) - WOOD COUNTY, TEXAS
- ---------- ========================================= ----------
[GRAPH]
Reported Oil Production = 215693 Bbls
Reported Gas Production = 3814 Mcf
Calculated Water Production = 652308 Bbls
<PAGE> 121
- ---------- ============================================ ----------
Calculated RAPPE-TURNER #3 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX, INC. Water
QUITMAN (SUB-CLARKSVILLE) - WOOD COUNTY, TEX
- ---------- ============================================ ----------
[GRAPH]
Reported Oil Production = 50050 Bbls
Reported Gas Production = 7358 Mcf
Calculated Water Production = 186535 Bbls
<PAGE> 122
- ---------- =================================== ----------
Calculated REPUBLIC INSURANCE CO. #3 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water RGP PRODUCTION Water
QUITMAN (DERR) - WOOD COUNTY, TEXAS
- ---------- =================================== ----------
[GRAPH]
Reported Oil Production = 87870 Bbls
Reported Gas Production = 9703 Mcf
Calculated Water Production = 6075 Bbls
<PAGE> 123
- ---------- ========================================== ----------
Calculated TURNER, RAPPE #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX OPERATING Water
QUITMAN N.W. (PALUXY) - WOOD COUNTY, TEXAS
- ---------- ========================================== ----------
[GRAPH]
Reported Oil Production = 245995 Bbls
Reported Gas Production = 36053 Mcf
Calculated Water Production = 779771 Bbls
<PAGE> 124
- ---------- =========================================== ----------
Calculated WATTS, J.L. #1 Production
Oil Production Rate vs Time Oil
Gas BBl/Mo or Mcf/Mo vs Months Gas
Water GULFTEX, INC. Water
MITCHELL CREEK FIELD - FRANKLIN COUNTY, TEX
- ---------- =========================================== ----------
[GRAPH]
Reported Oil Production = 49866 Bbls
Reported Gas Production = 127 Mcf
Calculated Water Production = 499447 Bbls
<PAGE> 125
[MAP]
OIL & GAS FIELD MAP
FOR EAST TEXAS BASIN
AS OF MAY 1972
WITH TBX RESOURCES PRINCIPAL LEASES
IN THE VARIOUS FIELDS OF
<PAGE> 126
EAST TEXAS FIELD, Gregg, Rusk, Upshur, Smith, Cherokee Counties, Texas 117
[MAP]
TBX RESOURCES, INC.
GEOLOGY ON EAST TEXAS FIELD LEASES
ROY H. LAIRD/BLOCK 122, J.T. FLORENCE
AND PROTHRO LEASES WITHIN CITY OF KILGORE
FROM PUB 5116 BUREAU OF ECON GEOLOGY
UNIV. OF TEXAS
<PAGE> 127
TBX RESOURCES, INC.
GEOLOGICAL COLUMN
FOR THE EAST TEXAS BASIN WITH
PRINCIPAL OIL AND GAS FORMATIONS ON
TBX RESOURCES LEASES
[MAP]
<PAGE> 128
[MAP]
TBX RESOURCES, INC.
OIL LEASES WITHIN N.E. BETHANY FIELD
PANOLA COUNTY, TEXAS
FROM PUBLISHED MAPS BY GEOMAP, INC.
STRUCTURAL MAP ON BASE OF FERRY LAKE ANHYDRITE
SCALE: 1 INCH=4,000 FEET
<PAGE> 129
[MAP]
TBX RESOURCES INC.
DALLAS, TEXAS
N.E. BETHANY FIELD
PANOLA COUNTY, TEXAS
<PAGE> 130
[MAP]
TBX RESOURCES, INC.
Oil Leases within larger Manziel Field
Wood County, Texas
From published maps by Geomap, Inc.
Structural Map on Base of Ferry Lake Anhydrite
[ILLEGIBLE]
<PAGE> 131
[MAP]
TBX RESOURCES, INC.
MANZIEL FIELD LEASES
WOOD COUNTY, TEXAS
J.H. McELYEA LEASE, 40 AC.
H.H. NOE LEASE, 38 AC.
M.A. HUDSON UNIT 'A', M.A. HUDSON UNIT 'B'
M.A. HUDSON ET AL, MANZIEL SWD SYSTEM,
HUDSON WELL 1 LEASES
<PAGE> 132
[MAP]
TBX RESOURCES, INC.
M.A. HUDSON ET AL UNIT LEASES
MANZIEL FIELD, WOOD CO.
<PAGE> 133
[MAP]
TBX RESOURCES, INC.
M.A. HUDSON ET UX LEASE
SAM BURCH SURVEY A-27 &
G.W. SMITH SUR. A-7
WOOD COUNTY
TEXAS
<PAGE> 134
[MAP]
(3 Miles South of Quitman, Texas)
TBX RESOURCES, INC.
WELL LOCATION PLAT
I certify that the data as
presented on this plat is PREVIOUS
true, correct, and complete, OPERATOR: R. McKay Moore
to the best of my knowledge. -------------------
/s/ R. McKAY MOORE WELL: McDade-Curry Unit Well No. 1
- --------------------------- -----------------------------
R. McKay Moore
330' FNL & 330' FWL OF 10 Ac. Unit
October 12, 1981 Scales: 105' FWL & 1070' FSL of
- ---------------------------
Date D. FERGUSON SURVEY, A-205
WOOD COUNTY, TEXAS
SCALE: 1 inch = 1,000 feet
<PAGE> 135
[MAP]
TBX RESOURCES, INC.
Oil Leases within larger Talco Field
Hagansport Unit, Franklin Co., Texas
From published maps by Geomap, Inc.
Structural Map on top of Paluxy Fm. Marker
<PAGE> 136
[MAP]
TBX RESOURCES, INC.
Oil Leases within Mitchell Creek Field
J.L. Hedrick lease, Hopkins Co., Texas
J.L. Watts lease, Franklin Co., Texas
<PAGE> 137
[MAP]
TBX RESOURCES, INC.
MITCHELL CREEK FIELD LEASES
J.L. HEDRICK LEASE IN HOPKINS COUNTY
J.L. WATTS LEASE IN FRANKLIN COUNTY
<PAGE> 138
[MAP]
I, M.L. Reed, being first duly sworn on
oath, state that I have knowledge of the facts and
matter herein set forth and that the same are true
and correct.
Name M.L. Reed Title Divn. Expl. Engr.
--------------- ----------------------
subscribed and sworn to before me this 22nd day
July, 1957.
Notary Public Gregg County, Texas TBX RESOURCES, INC.
----- R.R.C. 00965
/s/ C.G. CALAWAY C.G. Calaway MITCHEL CREEK FIELD
---------------- HOPKINS CO., TEXAS
Address Box 32, Kilgore, Texas Plat Showing
---------------------- Location of
Shell-J.L. Hedrick Lease
<PAGE> 139
[MAP]
TBX RESOURCES, INC.
SABIO OIL & GAS, INC.
J.L. WATTS NO. 1
BEING 1590 FEET SOUTH OF THE N.B.L.
AND 2255 FEET WEST OF THE E.B.L. OF THE
GEORGE B. HALYARD SURVEY, ABST. 660,
FRANKLIN COUNTY, TEXAS
Filed R.R.C. of Texas
March 29, 1992
<PAGE> 140
[MAP]
TBX RESOURCES, INC.
Oil Leases within larger Quitman Field
Wood County, Texas
From published maps by Geomap, Inc.
Structural Map on Base of Feery Lake Anhydrite
Scale: 1 inch = 2,000 feet
<PAGE> 141
[MAP]
REPUBLIC INSURANCE CO. LEASE 33 AC. TBX RESOURCES, INC.
IN HAZARD ANDERSON SURV. (A-10) QUITMAN (DERR) FIELD
A MILE NORTH OF QUITMAN, TEXAS WOOD COUNTY, TEXAS
REPUBLIC INSURANCE CO.
LEASE, WELL #3
Scale: 1 INCH = 2,000 Feet
<PAGE> 142
[MAP]
TBX RESOURCES, INC.
REPUBLIC INSURANCE CO. LEASE
WOOD CO., TEXAS
HAZARD ANDERSON SURVEY (A-10)
<PAGE> 143
[MAP]
TBX RESOURCES, INC.
QUITMAN FIELD
WOOD COUNTY, TEXAS
STRUCTURE: BASE OF AUSTIN CHALK
<PAGE> 144
[MAP]
TBX RESOURCES, INC.
"QUITMAN FIELD"
HAZARD ANDERSON SURVEY, A-10
Plocher-Rappe-Turner, Well 1-B
Rappe-Turner, Well 1-A
Rappe-Turner, Well 3 S.W.D
<PAGE> 145
[MAP]
TBX RESOURCES, INC.
J.L. JACOBS LEASE
WOOD COUNTY, TEXAS
<PAGE> 146
[MAP]
TBX RESOURCES, INC.
WELL LOCATION PLAT
PREVIOUS OPERATOR -- GIBSON DRILLING COMPANY
J.L. Jacobs No. 1 Well
--------------------------
Wm. Caison Survey A-123
Wood County, Texas
<PAGE> 147
[MAP]
TBX RESOURCES, INC.
GREGG COUNTY, TEXAS
"EAST TEXAS OIL FIELD"
WITHIN CITY OF KILGORE, TEXAS
MARY VAN WINKLE SURVEY A-208
CITY LOT 122 ROY H. LAIRD/BLK/122 LEASE
PROTHO LEASE, BEING 1 AC. BEGINNING OF
NW/C OF L.P. GRIFFIN LAND, CITY OF KILGORE
[ILLEGIBLE]
<PAGE> 148
[MAP]
TBX RESOURCES, INC.
GREGG COUNTY, TEXAS
"EAST TEXAS OIL FIELD"
WITHIN CITY OF KILGORE, TEXAS
MARY VAN WINKLE SURVEY A-208
ROY H. LAIRD / BLOCK 122 LEASE (RRC 06509)
J.T. FLORENCE LEASE (RRC 06669)
<PAGE> 1
EXHIBIT 99.11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form
10-SB of our report dated December 19, 1999, relating to the financial
statements of TBX Resources, Inc., which appear in such Registration Statement.
Dallas, Texas
May 2, 2000
/s/ JAMES A. MOYERS
----------------------------------
JAMES A. MOYERS, CPA
<PAGE> 1
EXHIBIT 99.12
CONSENT OF PETROLEUM ENGINEERS
We hereby consent to the use in the Form 10-SB being filed on behalf of
TBX Resources, Inc., of our report dated _______________ relating to the oil and
gas properties held by TBX Resources, Inc.
Dallas, Texas
April 28, 2000.
/s/ HAROLD O. NEFF
------------------------------
HAROLD NEFF & ASSOCIATES, INC.
