Gasco announced 2010 year-end total proved reserves of 42.5 billion cubic feet of natural gas equivalent ("Bcfe"), comprised of 39.7 billion cubic feet ("Bcf") of natural gas and 465,000 barrels of liquids. The Company's reserve mix is 93% natural gas and 7% liquid hydrocarbons. At year-end 2010, 100% of the Company's reserves were classified as proved developed. By comparison, Gasco's total proved reserves at year-end 2009 were 46.9 Bcfe, all of which were classified as proved developed.
Gasco's proved reserves at December 31, 2010 were computed using SEC guidelines that went into effect for the reporting of year-end 2009 proved reserves. Commodity prices used in calculating the economic quantities of reserves are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for the period January 2010 through December 2010.
For natural gas volumes, the Wyoming pool spot price of $3.96 per million British thermal units ("MMBtu") is adjusted by lease for energy content and transportation fees. For oil volumes, the average West Texas Intermediate posted price of $75.96 per barrel is adjusted for quality and local price differential. For 2010, Gasco's average adjusted product prices held constant used in calculating reserve quantities were $3.62 per thousand cubic feet of natural gas ("Mcf") and $64.97 per barrel of oil. This compares to the 2009 price deck of $2.87 per Mcf and $44.94 per barrel of oil used to calculate 2009 proved reserves.
Based on these prices, the estimated discounted net present value of Gasco's proved reserves, before projected income taxes, using a 10% per annum discount rate ("PV-10") was $46.9 million at December 31, 2010. For December 31, 2009, the SEC PV-10 number was $35.6 million.
All of the reserves valued in the report are located in Gasco's Riverbend Project area in Carbon, Duchesne, and Uintah Counties in Utah's Uinta Basin. Reserve estimates are engineered by independent reservoir engineering consultants, Netherland, Sewell & Associates, Inc. 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 Codification Topic 932, Extractive Activities – Oil and Gas. In accordance with SEC guidelines, reserve estimates do not include any probable or possible reserves that may exist for Gasco's properties.
2010 Capital Expenditure Program
Gasco also announced an initial capital expenditure budget ("Capex") of $6 million for its 2011 oil and gas activities. In the Uinta Basin, the Company allocated approximately $2.4 million for its continued up-hole recompletion program targeting natural gas and an additional $1.6 million for the drilling and completion of two Green River Formation oil wells. A large part of the remaining $2.0 million budget may be allocated to additional investment in existing and new California oil and gas prospects in the San Joaquin Basin. Capex will be funded primarily from cash on hand, cash flow from operations and borrowings under the Company's reserve-based revolving line of credit. The initial 2011 Capex budget is subject to market conditions, drilling results, oilfield service availability, and commodity prices.
Gasco's CEO and President King Grant said, "We benefited from upward reserve revisions of 750 MMcfe, or 18.5% of 2010's produced volumes, due to improved well performance in both oil and gas wells. The 40% decrease in proved developed non-producing reserves is attributed to the new production brought online in 2010 as a result of our up-hole recompletion program that focuses entirely on targeting reserves that are classified as proved developed non-producing. Given that we drilled no new wells in 2010 and could book no new reserves through the drill bit, we are pleased to have held our reserve base relatively constant with only a 9% decrease year-over-year.
"We have been closely following the continued success experienced by other operators in the Green River oil play in the Uinta. Given the crude oil price environment, we plan to commit a portion of our 2011 preliminary budget to oil drilling. We intend to commence a two-well Green River oil program to test its productive potential across what we estimate to be over 11,000 net acres that are prospective for these shallow 4,500-foot to 6,000-foot oil wells. The first well is permitted and is expected to spud in the second quarter 2011. The pre-spud estimate for recoverable reserves from this two-well program is 100,000 barrels of oil. We will closely monitor commodity prices and our cash flow during 2011 and may modify our investment plans as conditions warrant."
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