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For Immediate Release on Wednesday February 28,
2007
Gasco Energy Announces Year-End Proved Reserves
DENVER – February 28, 2007 – Gasco Energy
(AMEX: GSX) today announced 2006 year-end proved reserves
and a sensitivity case run at higher prices.
2006 Proved Reserves
Gasco’s year-end, estimated total proved reserves
were approximately 42.2 billion cubic feet of natural
gas equivalent (Bcfe), comprised of 40.0 billion cubic
feet of natural gas (Bcf) of natural gas and 370,581
barrels of liquids. The company’s
reserve mix is 95% natural gas and 5% liquid hydrocarbons,
including condensate. Approximately 97% of total
reserves are categorized as proved developed and 3%
were proved undeveloped. For 2006, Gasco replaced
434% of production exclusive of price-related revisions.
The 2006 totals compare to Gasco’s total proved
reserves at year-end 2005 of 76.7 Bcfe. At year-end
2005, approximately 26% of total reserves
were categorized as proved developed, 74% were proved
undeveloped (PUD). When comparing 2006 proved
reserves to 2005’s estimated quantities, Gasco
grew the proved developed component by 109% to 41.0
Bcfe, while total proved reserves declined by 46% and
PUDs declined by 98% to 1.2 Bcfe. Gasco had total positive
revisions to proved developed reserves of 1.9 Bcfe
and downward revisions to PUDs of 52.5 Bcfe.
December 31, 2006 Rockies blended pricing of $4.51per
million British thermal units (MMbtu) converts to a
price at the wellhead of $4.04 per MMBtu. At this price
most of Gasco’s PUD inventory had a net present
value less than 10% and was therefore re-classified
to the probable reserve category. These reserves
can revert to PUD depending upon the price deck used
to run the reserves report. Year-end pricing
is used to determine the economic viability of PUD
locations, which are the most sensitive to commodity
prices and current per-well investment. In accordance
with SEC guidelines, reserve estimates do not include
any probable or possible reserves which may exist for
Gasco’s properties. Proved reserves were
fully engineered by Netherland Sewell & Associates
(NSAI), Gasco’s independent reservoir engineering
firm.
For 2006 reserve quantities, Gasco’s standardized
measure of discounted future net cash flows (commonly
known as the SEC PV-10 figure) for proved reserves
at year end was $63.2 million. The 2006 SEC PV-10
calculation used net year-end commodity prices of $4.47
per thousand cubic feet of natural gas (Mcf) at the
wellhead, net of all gathering, processing, and marketing
and $43.21 per barrel of crude oil. The 2005
SEC PV-10 calculation used net year-end commodity prices
of $8.01 per Mcf of natural gas and $59.87 per barrel
of crude oil. Reserve estimates are engineered
by independent reservoir engineering consultants, NSAI
and conform to the definition as set forth in the SEC
Regulation S-X Part 210.4-10 (a) as clarified by subsequent
Commission Staff Accounting bulletins. The proved reserves
are also in accordance with Financial Accounting Standards
Board Statement No. 69 requirements.
Reserve Quantities Gas Oil Equivalents
Mcf Bbl Mcfe
Balance, December 31, 2005 74,455,128 377,288 76,718,856
Extensions and discoveries 16,006,692 97,529 16,591,866
Revisions of previous estimates (47,010,172) (212,400) (48,284,572)
Sales of reserves in place -- -- --
Purchases of reserves in place 210,954 129,810 989,814
Production (3,686,638) (21,646) (3,816,514)
Balance, December 31, 2006 39,975,964 370,581 42,199,450
Proved Developed Reserves 38,817,964 370,581 41,041,450
Reserves Summary at December 31, 2006
Net Reserves Future Net Revenue ($)
Gas Oil
Category (Mcf) (Bbl) Total SEC PV10
Proved Developed
Producing 32,356,763 327,771 105,198,800 55,669,100
Non-Producing 6,461,201 42,810 18,574,100 6,928,600
Proved Undeveloped 1,158,000 -- 2,664,100 569,500
Total Proved 39,975,964 370,581 $126,410,000 $63,167,200
Reflects commodity prices
of $4.47 Mcf of natural gas and $43.21 per Bbl
of liquids as of December
31, 2006.
Price Sensitivities
Gasco also ran economic sensitivities
at December 31, 2006 at an assumed Rockies price
of $7.00 per MMBtu, which equates to $6.46 MMBtu
at the well head, to provide another reserve case
scenario. This sensitivity price was selected because
it is above the price at which all of the reserves
that could be classified as proved undeveloped at
December 31, 2006 would be included in the reserve
report. The below case should not be confused with
Gasco’s SEC year-end proved reserves and does not comply with SEC pricing assumptions, but does comply with all other definitions. The case presented is intended to show reserve sensitivities to the commodity price. As indicated above, Gasco’s
year-end, estimated total proved reserves were approximately
42.2 Bcfe.
Reserves Sensitivity Summary at $7.00 MMBtu Case ($6.46 MMBtu at the wellhead)
Net Reserves
Gas Oil Total
Category (Mcf) (Bbl) (Mcfe)
Proved Developed
Producing 31,903,565 324,530 33,850,745
Non-Producing 6,326,928 41,984 6,578,832
Proved Undeveloped 80,050,696 572,284 83,484,400
Total Proved 118,281,189 938,798 123,913,977
Assumes commodity prices of $7.14 Mcf of natural gas and $46.30 per Bbl of liquids.
Under the $7.00 per MMBtu and $46.30 per barrel
scenario, Gasco would have grown its proved reserves
from 76.7 Bcfe at 12/31/05 to 124 Bcfe, of which
67% would be classified as PUD and 33% proved developed. Growth
in Gasco’s reserves under this non-SEC scenario
is 62%. A comparison follows in the table below.
Reserves in Natural Gas Equivalents (Mcfe)
2006 2005 2006 2005
Proved Proved % $7.00 Proved %
Category Reserves Reserves Chg. Rockies Reserves Chg.
Case
Proved
Developed
Producing 34,323,389 15,871,600 116% 33,850,745 15,871,600 113%
Proved
Developed
Non-Producing 6,718,061 3,773,027 78% 6,578,832 3,773,027 74%
Proved
Undeveloped 1,158,000 57,074,229 (98%) 83,484,400 57,074,229 46%
Total Proved 42,199,450 76,718,856 (45%) 123,913,977 76,718,856 62%
2005 reflects YE pricing of $8.01 Mcf of natural
gas and $59.87 per Bbl of liquids.
2006 reflects YE
pricing of $4.47 Mcf of natural gas and $43.21 per
Bbl of liquids.
2006 $7.00 Rockies Case assumes $7.14
Mcf of natural gas and $46.30 per Bbl of liquids.
Management Comment
Mark Erickson, Gasco’s President and CEO, said: "Resources plays like
our Riverbend Project are particularly sensitive to commodity prices and per-well
investment. The year-end prices, along with the well investment during
the year, were at a level where the preponderance of our PUDs were removed from
the estimated quantities of reserves and moved to the probable classification. This
year was particularly challenging with the drop in commodity prices at December
31, 2006, especially when compared to the relatively high pricing used at December
31, 2005. We expect service costs to come in line with commodity prices
going forward. Gasco’s operations staff continues to work very hard
to reduce total well investment through further reductions in drilling days and
by aggressively bidding services. ”
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Definition - Reserves
Reserves are those quantities of crude oil, natural
gas, and natural gas liquids that are anticipated
to be commercially recovered from known accumulations
from a given date forward. Reserve estimates involve
varying degrees of uncertainty, depending largely
on the amount of reliable geological and engineering
data available at the time of the estimate and
the interpretation of the data. The relative degree
of uncertainty can be conveyed by broadly placing
reserves into one of two categories -- proved or
unproved.
Two basic methods are commonly used by industry to
prepare reserve estimates -- the deterministic and
probabilistic methods. The deterministic method yields
a single best estimate of reserves based on known
geological, engineering and economic data. The probabilistic
method uses known geological, engineering and economic
data to generate a range of estimated reserve quantities
and their associated probabilities. Each reserve
classification gives an indication of the probability
of recovery.
Definition - Proved Reserves
Proved reserves are those quantities of crude oil,
natural gas, and natural gas liquids which geological
and engineering data demonstrate with reasonable
certainty to be recoverable in future years from
known reservoirs under existing economic and operating
conditions. Proved developed reserves include proved
developed producing reserves and proved developed
behind-pipe reserves. Proved developed producing
reserves are only those reserves expected to be
recovered from existing completion intervals in
existing wells. Proved developed behind-pipe reserves
are those reserves expected to be recovered from
existing wells where a relatively minor capital
expenditure is required for recompletion. Proved
undeveloped reserves are those reserves expected
to be recovered from new wells on undrilled acreage
or from existing wells where a relatively major
expenditure is required for recompletion.
Definition - Unproved Reserves
Unproved reserves are considered less certain to
be recovered than proved reserves. Estimates of
unproved reserves are based on geologic and/or
engineering data similar to that used to estimate
proved reserves, but technical, contractual, economic
considerations and/or SEC, state or other regulations
preclude such reserves from being classified as
proved. Unproved reserves may be further sub-classified
as probable and possible to denote progressively
increasing uncertainty of recoverability.
Importantly, estimation of unproved reserves may
assume future economic conditions different than
those prevailing at the time of the estimate. The
effect of possible future improvements in economic
conditions and technological developments can be
expressed by allocating appropriate quantities of
reserves to the probable and possible classifications.
Definition - Probable Reserves
Probable reserves are estimates of unproved reserves
which analysis of geological and engineering data
suggests are more likely than not to be recoverable.
For estimates of probable reserves based on probabilistic
methods, there should be at least a 50% probability
that the quantities of reserves actually recoverable
will equal or exceed the sum of the estimated proved
plus probable reserves.
Probable reserves may include:
1. reserves in formations known to be
productive where SEC regulations limit recognition of proved reserves to direct-offset
locations one legal spacing-unit away from a producing well;
2. reserves anticipated to be proved by
normal step-out drilling where subsurface control is currently inadequate to
classify these reserves as proved;
3. reserves in formations that appear
to be productive based on well-log characteristics but lack core data or other
definitive tests to indicate productive potential and which are not analogous to
producing or proved reserves in the area;
4. incremental reserves attributable to
infill drilling that could have been classified as proved if closer statutory
spacing had been approved at the time of the estimate;
5. reserves attributable to improved recovery
methods that have been established by repeated commercially successful applications
where:
a. a project
or pilot is planned but not in operation; and
b. rock,
fluid and reservoir characteristics appear favorable for commercial application;
6. reserves in an area of the formation
that appears to be separated from the proved area by faulting and where geologic
interpretation indicates that the area is structurally higher than the proved
area;
7. reserves attributable to future workover,
treatment, re-treatment, change of equipment, or other mechanical procedures,
where such mechanical procedure has not been proved successful in wells which
exhibit similar behavior in analogous reservoirs; and/or
8. incremental reserves in proved reservoirs
where an alternative interpretation of performance or volumetric data indicates
more reserves are present than can be classified as proved.
Definition - Possible Reserves
Possible reserves are estimates of unproved reserves
which analysis of geological and engineering data
suggests are less likely to be recovered than probable
reserves. For estimates of possible reserves based
on probabilistic methods, there should be at least
a 10% probability that the quantities of reserves
actually recovered will equal or exceed the sum
of the estimated proved plus probable plus possible
reserves.
Possible reserves may include:
1. reserves which, based on geological
interpretations, could possibly extend beyond areas classified as probable;
2. reserves in formations that appear
to be petroleum bearing based on log and core analysis but may not be productive
at commercial rates;
3. incremental reserves attributed to
infill drilling that are subject to technical uncertainty;
4. reserves attributed to improved recovery
methods where:
a.
a project or pilot is planned but not in operation; and
b. rock, fluid and reservoir characteristics are such that there is a
reasonable doubt that the project will be commercial; and/or
5. reserves in an area of the formation
that appears to be separated from the proved area by faulting and where geological
interpretation indicates the area is structurally lower than the proved area.
About Gasco Energy
Gasco
Energy, Inc. is a Denver-based natural gas and oil
exploitation and development company that focuses
on natural-gas-rich prospects in the Rocky Mountain
area of the United States. The Company
currently is active in the Uinta Basin in Utah and
controls acreage in the Greater Green River Basin
of Wyoming. To learn more, visit www.gascoenergy.com.
Forward-looking statements
Certain
statements set forth in this press release relate
to management’s future plans, objectives
and expectations. Such statements are forward-looking
within the meanings of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements
other than statements of historical facts included
in this press release, including, without limitation,
statements regarding the Company’s future financial
position, potential resources, business strategy,
budgets, projected costs and plans and objectives
of management for future operations, are forward-looking
statements. In addition, forward-looking statements
generally can be identified by the use of forward-looking
terminology such as “may,” “will,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” or “continue” or
the negative thereof or similar terminology. Although
any forward-looking statements contained in this
press release are to the knowledge or in the judgment
of the officers and directors of the Company, believed
to be reasonable, there can be no assurances that
any of these expectations will prove correct or that
any of the actions that are planned will be taken. Forward-looking
statements involve known and unknown risks and uncertainties
that may cause the Company’s actual performance
and financial results in future periods to differ
materially from any projection, estimate or forecasted
result. Some of the key factors that may cause
actual results to vary from those the Company expects
include inherent uncertainties in interpreting engineering
and reserve or production data; operating hazards;
delays or cancellations of drilling operations because
of weather and other natural and economic forces;
fluctuations in oil and natural gas prices in response
to changes in supply; competition from other companies
with greater resources; environmental and other government
regulations; defects in title to properties; increases
in the Company’s cost of borrowing or inability
or unavailability of capital resources to fund capital
expenditures; and other risks described under “Risk
Factors” in Item 1. of the Company’s
2006 filing on Form 10-K filed with the Securities
and Exchange Commission on February 28, 2006.
Contact for Gasco Energy, Inc.: Investor Relations:
303-483-0044
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