BPZ Resources, Inc. - Shareholder.com

As of December 31, 2010, we owned a 100% working interest in the Corvina and Albacora fields, subject to Peruvian
government royalties of 5% to 20% net revenue interest depending on the level of production. The effect of these royalty interest
payments is reflected in the calculation of our net proved reserves. Our estimate of proved reserves have been prepared under the
assumption that our license contract will allow production for the possible 40-year term for both oil and gas, as more fully discussed
under “Description of Block Z-1” above.
Net Proved Crude Oil Reserves and Future Net Cash Flows
As of December 31, 2010
Based on Average First Day-of-the-Month Fiscal-Year Prices
Actual
Estimated
Future Capital
Expenditures
(In MBbls) (In thousands)
Proved Developed Producing .............................................................................................. 5,427 $ 30,528
Proved Developed Not Producing ....................................................................................... 6,804 27,400
Proved Undeveloped ........................................................................................................... 26,645 325,800
Total ................................................................................................................................ 38,876 $ 383,728
Standardized Measure of Discounted Future Net Cash Flows, Discounted @ 10% (in
thousands) ........................................................................................................................ $ 1,098,361
These estimates are based upon a reserve report prepared by NSAI, independent petroleum engineers. NSAI used internally
developed reserve estimates and criteria in compliance with the SEC guidelines based on data provided by us. See Item 7. –
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and
Estimates” and “Supplemental Oil and Gas Disclosure,” in Item 8. – “Financial Statements and Supplementary Data.” NSAI’s report
is attached as Exhibit 99.1 to this Form 10-K.
The reserve volumes and values were determined under the method prescribed by the SEC, which for 2010 requires the use
of an average price, calculated as the twelve-month first day of the month historical average price for the twelve-month period prior to
the end of the reporting period, unless prices are defined by contractual arrangements, excluding escalations based upon future
conditions. Prior to December 31, 2009, the SEC rules required the use of year-end prices.
As of December 31, 2010, we did not have any proved undeveloped reserves previously disclosed that have remained
undeveloped for five years or more. As of December 31, 2010, we have three PUD locations included in our proved oil reserves that
are scheduled to be drilled after five years, as we have included contingencies that account for certain possible delays in our drilling
schedule due to unexpected events, such as early mechanical issues. However, once those issues are resolved, we anticipate drilling
these wells.
In accordance with SEC guidelines, the reserve engineers’ estimates of future net revenues from our properties, and the
present value of the cash flows from the properties, are made using the twelve-month first day of the month historical average oil
prices for the December 31, 2010 reserves and oil sales prices in effect as of the end of the period of such estimates for prior periods,
and are held constant throughout the life of the properties, except where the guidelines permit alternate treatment, including the use of
fixed and determinable contractual price escalations. Historically, the prices for oil have been volatile and are likely to continue to be
volatile in the future.
Qualifications of Technical Persons and Internal Controls Over Reserves Estimation Process
Our policies regarding internal controls over the recording of reserves estimates requires reserves to be in compliance with
the SEC definitions and guidance and prepared in accordance with generally accepted petroleum engineering principles.
Our Chief of Strategy and Technology is responsible for compliance in reserves bookings and utilizes the reserves estimates
made by our third party reserve consultant, NSAI, for the preparation of our reserve report. Our Chief of Strategy and Technology is a
petroleum engineer with over 20 years operating experience in international oil and gas projects. He holds an Advanced Degree in
Mathematics from Ecole Centrale de Paris, France, a Master’s Degree and Ph.D. in Petroleum Engineering from Texas A&M
University, as well as an MBA from the University of Colorado.
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