Petro Resources Increases Reserves at HHEP II, Continues Drilling
Petro Resources Corporation announced updated results of its participation in Hall-Houston Exploration II, L. P. Based on an independent reserve engineering evaluation of the HHEP II reserves using NYMEX strip prices as of April 1, 2008, adjusted for the Company's partnership interest and the general partner interest, the present value discounted at 10% for the total proved reserves attributable to the Company's interest is approximately $10.8 million. This represents the Company's first release of information concerning the reserve estimates for the Company's interest in HHEP II. The PV-10 of $10.8 million is not included in the previously announced PV-10 of $54.3 million for the total proved reserves in the Company's other properties as of December 31, 2007. The total proved reserves attributable the Company's partnership interest in HHEP II are estimated at approximately 338,000 boe. The Company expects that this investment should yield an internal rate of return of 25% to 30%.
HHEP II has drilled a total of 19 wells exclusively in the Gulf of Mexico of which 15 wells have been successful. The partnership plans to drill three exploratory wells and two development wells later this year. If successful, the exploratory wells should provide increases in both present value and reserves above the current levels.
The Company has a 5.33% partnership interest in HHEP II and has funded approximately $4.4 million of its $8.0 million commitment and expects to fully fund the balance of its commitment prior to the end of 2008 and expects to begin receiving cash flow from HHEP II during the first half of 2009. The Company's investment in HHEP II is carried at cost on its Balance Sheet as an "Other Asset - Investment in Partnership."
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