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Supplemental Oil and Gas Disclosures (Unaudited)
12 Months Ended
Feb. 29, 2024
Extractive Industries [Abstract]  
Supplemental Oil and Gas Disclosures (Unaudited)

Note 8 – Supplemental Oil and Gas Disclosures (Unaudited)

 

Capitalized Costs Relating to Oil and Gas Producing Activities

 

The estimates of proved oil and gas reserves utilized in the preparation of these statements were prepared by Kurt Mire for the years ended February 29, 2024 and February 28, 2023, using reserve definitions and pricing requirements prescribed by the SEC. The Company used a combination of production performance and offset analogies, along with estimated future operating and development costs as provided by the Company and based upon historical costs adjusted for known future changes in operations or developmental plans, to estimate its reserves.

 

 

There are numerous uncertainties inherent in estimating quantities of proved reserves, projecting future rates of production and projecting the timing of development expenditures, including many factors beyond our control. The reserve data represents only estimates. Reservoir engineering is a subjective process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretations and judgment. All estimates of proved reserves are determined according to the rules prescribed by the SEC. These rules indicate that the standard of “reasonable certainty” be applied to the proved reserve estimates. This concept of reasonable certainty implies that as more technical data becomes available, a positive, or upward, revision is more likely than a negative, or downward, revision. Estimates are subject to revision based upon a number of factors, including reservoir performance, prices, economic conditions and government restrictions. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of that estimate. Reserve estimates are often different from the quantities of natural gas and oil that are ultimately recovered. The meaningfulness of reserve estimates is highly dependent on the accuracy of the assumptions on which they were based. In general, the volume of production from natural gas and oil properties we own declines as reserves are depleted. Except to the extent we conduct successful development activities or acquire additional properties containing proved reserves, or both, our proved reserves will decline as reserves are produced. There have been no major discoveries or other events, favorable or adverse, that may be considered to have caused a significant change in the estimated proved reserves since February 29, 2024. The Company emphasizes that reserve estimates are inherently imprecise. Accordingly, the estimates are expected to change as more current information becomes available. In addition, a portion of the Company’s proved reserves are proved developed non-producing and proved behind pipe, which increases the imprecision inherent in estimating reserves which may ultimately be produced.

 

All of the Company’s reserves are located in the United States.

 

   February 29, 2024   February 28, 2023 
Proved oil and gas properties  $3,330,331   $3,006,271 
Unproved oil and gas properties   -    - 
Accumulated depreciation, depletion, amortization and impairment   (2,943,821)   (2,844,022)
Total acquisition, development and exploration costs  $386,510   $162,249 

 

Estimated Quantities of Proved Oil and Gas Reserves

 

The following table sets forth proved oil and gas reserves together with the changes therein, proved developed reserves and proved undeveloped reserves for the years ended February 29, 2024 and February 28, 2023. Units of oil are in thousands of barrels (“MBbls”) and units of gas are in millions of cubic feet (“MMcf”). Gas is converted to barrels of oil equivalents (“MBoe”) using a ratio of six Mcf of gas per Bbl of oil.

 

   2024   2023 
   Oil   Gas   BOE   Oil   Gas   BOE 
Proved reserves:                              
Beginning of year   22    88    37    26    116    45 
Revisions   2    12    4    (1)   3    0 
Extensions and discoveries   -    -    -    -    -    - 
Purchases of minerals-in-place                              
Sales of minerals-in-place   -    -    -    -    -    - 
Production   (3)   (30)   (8)   (3)   (31)   (8)
End of year   21    70    33    22    88    37 
                               
Proved developed reserves:                              
Beginning of year   13    35    19    18    65    29 
End of year   12    18    15    13    35    19 
                               
Proved not producing reserves:                              
Beginning of year   2    5    3    1    4    5 
End of year   5    14    7    2    5    3 
                               
Proved undeveloped reserves behind pipe:                              
Beginning of year   7    49    15    -    -    - 
End of year   17    120    37    7    49    15 

 

 

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Reserves

 

The standardized measure of discounted future net cash flows, in management’s opinion, should be examined with caution. The basis for this table is the reserve studies prepared by the Company’s independent petroleum engineering consultants, which contain imprecise estimates of quantities and rates of future production of reserves. Revisions of previous year estimates can have a significant impact on these results. Also, exploration costs in one year may lead to significant discoveries in later years and may significantly change previous estimates of proved reserves and their valuation. Therefore, the standardized measure of discounted future net cash flow is not necessarily indicative of the fair value of the Company’s proved oil and natural gas properties.

 

Future cash inflows for 2024 were computed by applying the average price for the year to the year-end quantities of proved reserves. The 2024 average price for the year was calculated using the 12-month period prior to the ending date of the period covered by the report, determined as an un-weighted arithmetic average of the first-day-of-the-month price for each month within such period. Adjustment in this calculation for future price changes is limited to those required by contractual arrangements in existence at the end of each reporting year. Future development, abandonment and production costs were computed by estimating the expenditures to be incurred in developing and producing proved oil and natural gas reserves at the end of the year, based on year-end costs, assuming continuation of year-end economic conditions. Future income tax expense was computed by applying statutory rates, less the effects of tax credits for each period presented, and to the difference between pre-tax net cash flows relating to the Company’s proved reserves and the tax basis of proved properties, after consideration of available net operating loss and percentage depletion carryovers. Discounted future net cash flows have been calculated using a ten percent discount factor. Discounting requires a year-by-year estimate of when future expenditures will be incurred and when reserves will be produced.

 

The estimated present value of future cash flows relating to prove reserves is extremely sensitive to prices used at any measurement period. The prices used for each commodity for the years ended February 29, 2024 and February 28, 2023, as adjusted, were as follows:

 

  

Oil (Bbl)

Using

NYMEX

WTI

  

Gas (Mcf)

Using

NYMEX

Henry Hub

 
2024 (average price)  $77.29   $2.52 
2023 (average price)  $93.11   $6.10 

 

The information provided in the tables set out below does not represent management’s estimate of the Company’s expected future cash flows or of the value of the Company’s proved oil and gas reserves. Estimates of proved reserve quantities are imprecise and change over time as new information becomes available. Moreover, probable and possible reserves, which may become proved in the future, are excluded from the calculations. The arbitrary valuation prescribed under ASC No. 932 requires assumptions as to the timing and amount of future development and production costs. The calculations should not be relied upon as an indication of the Company’s future cash flows or of the value of its oil and gas reserves.

 

The following table sets forth the standardized measure of discounted future net cash flows relating to proven reserves for the years ended February 29, 2024 and February 28, 2023, respectively (stated in thousands):

 

   2024   2023 
Future cash inflows  $1,753   $2,525 
Future costs:          
Production costs   (678)   (1,136)
Future tax expense   (128)   (192)
Future development costs   (339)   (339)
Future net cash flows   608    858 
10% annual discount for estimated timing of cash flows   (187)   (196)
Standardized measure of discounted net cash flows  $421   $662 

  

Summary of Changes in Standardized Measure of Discounted Future Net Cash Flows

 

The following table summarizes the principal sources of change in the standardized measure of discounted future estimated net cash flows at 10% per annum for the years ended February 29, 2024 and February 28, 2023, respectively (stated in thousands):

 

   2024   2023 
Increase (decrease):          
Beginning of year  $662   $602 
Sales of oil produced, net of production costs   212    153 
Net changes in sales and transfer prices and in production costs and production costs related to future production   (482)   1,046 
Previously estimated development costs incurred during the period   -    - 
Changes in future development costs   -    (150)
Revisions of previous quantity estimates due to prices and performance   52    (11)
Accretion of discount   60    60 
Discoveries, net of future production and development costs associated with these extensions and discoveries   -    - 
Purchases and sales of minerals in place   -    - 
Timing and other   (83)   (1,038)
End of year  $421   $662