MorningStar Partners, L.P. Interests
Reserve Evaluation – NYMEX Strip Price
August 30, 2022
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geologic and engineering data available at the time of the estimate and the interpretation of such data, as well as the inherent uncertainties attributable to variations in reservoir and rock
quality, offset drainage, mechanical wellbore integrity among others. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to
be recovered than proved reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. This report addresses only the
proved reserves attributable to the properties evaluated herein.
Non-producing reserve estimates,
for both developed and undeveloped properties, were forecast using either volumetric or analogy methods, or a combination of both. These methods provide a relatively high degree of accuracy for predicting proved developed non-producing and proved undeveloped reserves. The assumptions, data, methods and procedures used herein are appropriate for the purpose served by this report.
CG&A evaluated 75 proved developed non-producing (PDNP) and 196 proved undeveloped (PUD)
locations, targeting various reservoirs in Texas and New Mexico. Non-producing and undeveloped reserves were assigned based on regional type curves and analogy to recent, modern completions. Furthermore, the
development schedule and future development costs for drilling and completion were provided by MorningStar and accepted as provided. However, our review showed the development plan and related capital to be reasonable and appropriate for this
evaluation.
General Discussion
An on-site field inspection of the properties has not been performed. The mechanical operation or
condition of the wells and their related facilities have not been examined nor have the wells been tested by CG&A. Possible environmental liability related to the properties has not been investigated nor considered. The cost of
plugging and the salvage value of equipment at abandonment have not been included as requested.
The reserve classifications and the
economic considerations used herein conform to the criteria of the SEC. However, the use of variable hydrocarbon pricing does not conform to SEC criteria, and it is not intended that any of these estimates be used for the purpose of requiring such
conformity. The reserves and economics are predicated on regulatory agency classifications, rules, policies, laws, taxes, and royalties currently in effect except as noted herein. MorningStar’s operations may be subject to various levels of
governmental controls and regulations. These controls and regulations may include matters relating to land tenure, drilling, production practices, environmental protection, marketing and pricing policies, royalties, various taxes and levies
including income tax and are subject to change from time to time. Such changes in governmental regulations and policies may cause volumes of reserves actually recovered and amounts of income actually received to differ significantly from the
estimated quantities.
The estimates and forecasts were based upon interpretations of data furnished by your office and available from our
files. To some extent information from public records has been used to check and/or supplement these data. The basic engineering and geological data were subject to third party reservations and qualifications. Nothing has come to our attention,
however, that would cause us to believe that we are not justified in relying on such data. All estimates represent our best judgment based on the data available at the time of preparation. Due to inherent uncertainties in future production rates,
commodity prices and geologic conditions, it should be realized that the reserve estimates, the reserves actually recovered, the revenue derived therefrom and the actual cost incurred could be more or less than the estimated amounts.
