WHAT

Welcome to the website of Ammonite Resources. In addition to providing information about our firm's petroleum and mineral resources technical and business advisory services, our objective is to make the Ammonite website a friendly place where petroleum and mineral professionals, government regulators, and the investment community, can meet to exchange authoritative ideas on energy policy and industry activity in the Energy Forum and the In The Trenches web pages. Reviews of books of general geoscience interest can be found on the Geoscience Book Reviews web page. We look forward to your contributions!

The principal business of Ammonite Resource is performing geotechnical and economic due diligence on the producing assets and undrilled prospect portfolios of private companies on behalf of institutional clients considering making a significant equity investment in the company. Typically, an offering company will provide single quantitative estimates for prospect reserve and production forecasts - i.e. a well is expected to initially produce 2 MMCF/day of gas and will have an ultimate recovery of 4 BCF. As history has repeatedly proven, the actual results may vary significantly. The same applies to probable and possible reserve estimates of known discoveries.

In today’s highly competitive M&A market, a prospective buyer will not be a successful bidder unless it attributes value to unproved resources and the potential upside of the undrilled prospect portfolio. Ammonite Resources now performs detailed risk analysis at the individual prospect level and for an entire portfolio of producing and non-producing assets. In this way, a range of resources and values can be established for all classes of assets.

So how is this done? The quantified chance of “geological success” involves assigning a risk factor to each play element – reservoir quality, trap and seal, source rock presence and maturity, and timing of oil migration relative to trap formation. Potential resources are then estimated using a probabilistic approach to estimating net reservoir pay, reservoir area, porosity, hydrocarbon saturation, and recovery factors. These data are then run through a statistical Monte Carlo analysis software program. A range of possible outcomes results with P90 –P50-Pmean-and P10 being the usual risk benchmarks. “P90, for example, means that there is at least a 90% probability of the particular outcome (i.e., BCF reserves/resource) occurring, which would be a “low case” scenario. “P10” is a “high side” scenario, as there would only be a 10% chance that this quantity or greater, would occur. Individual prospects are aggregated into a company portfolio, which is then statistically analyzed by further Monte Carlo simulations. Future cash flow can be estimated by applying a price deck to the projected volumetrics.

Statistical analysis works well in nature, as naturally occurring phenomena – such as oilfield size distribution, have a log normal distribution. This means that there are a very small number of very large fields, and an increasing larger number of progressively smaller fields.

A proved reserves report by a nationally recognized petroleum engineering firm quantifies past results. However, the usual deterministic (single figure) estimate for probable and possible reserves in known discoveries, and for undrilled prospects resource estimates rarely provides accurate forecasts of the future. Management’s expectations as to future production and cash flow are better managed by a statistical analysis of the company’s producing and non-producing properties. A statistical analysis of, for example, the possible outcomes of a three year drilling program, is an invaluable planning tool for expected drilling and completion costs, production profiles, reserves and cash flow.

The figures reproduced below demonstrate the differences between risked and unrisked portfolio reserve/resource volumetrics, and show the range of benchmarked resource expectations.

Dr. Robert Merrill manages Ammonite’s portfolio risk analysis practice from Houston. By clicking on the icons below, one can access the Adobe PDF versions of two PowerPoint presentations prepared by Bob on Monte Carlo risk analysis and its application to portfolio evaluation.

Presentation on oil and gas property evaluation using Monte Carlo statistical analyses. VIEW

Presentation on oil and gas property portfolio analysis using a Monte Carlo Statistical Approach. VIEW

Ammonite Resources is pleased to announce that it has entered into a collaborative agreement with AJM Petroleum Consultants in Calgary, Alberta. AJM is a leading Canadian petroleum engineering firm with a Canadian and solid international practice. Ammonite has used AJM’s services over the past couple of years on behalf of our clients, and has been impressed by their attention to detail, geological as well as engineering expertise, and AJM’s professionalism. The firm developed a very useful Canadian well database with the trademarked name of “PetroCube”, which it has now sold to GeoLogic Systems, Ltd. Ammonite has accessed PetroCube through the AJM license to research statistical production, reserve, and capital and operating cost data by specific pools, sections and townships in areas we have evaluated for Ammonite clients. On future Canadian and International projects where reservoir and operational engineering expertise is required beyond Ammonite’s in-house skill sets, we will team up with AJM. More information about AJM Petroleum Consultants can be found on the firm’s website at www.ajma.net.

It has been well over a year since Ammonite has updated our website. This has been due largely to the very busy pace of our business in the current petroleum industry boom.

We have been busy – working on exploration and development projects in North and South America, Europe and the Middle East. Engagements have ranged from evaluating the producing assets and undrilled prospect portfolios of companies in the United States – including Alaska, Canada, Great Britain, Kuwait, North Africa, Colombia and Brazil for private equity investors; reviewing a number of heavy oil development projects in Alberta and offshore the United Kingdom; evaluating a farmout opportunity in Qatar for an independent oil company; preparing a regional assessment of the coalbed methane potential in the Cherokee Basin in Oklahoma; and evaluating several Canadian CBM projects. As geoscience experts to counsel, we have worked in oil and gas litigation matters offshore Louisiana and offshore Eastern Canada, and have also advised Canadian counsel in two international mining lawsuits.

Ammonite’s approach to prospect portfolio evaluation now includes a full probabilistic analysis. We assess the chance of geologic success for each prospect in a portfolio, and then run a Monte Carlo statistical evaluation of the possible outcomes that would result from drilling the portfolio. With probabilistic P90-P50-Pmean-P10 outcomes quantified, future production and cash flow expectations can be better managed. It is also very instructive to compare the projections of the company with the Ammonite risked forecasts. Dr. Robert Merrill manages the firm’s portfolio risk analysis practice from Houston.

The petroleum industry boom has impacted Ammonite in terms of personnel changes. There is a serious shortage of experienced geoscientists, and as a consequence, employee compensation packages have become very attractive. Senior Consultants Jeff Lund, Mohamed Abdel-Rahman, Dick Bishop, Russell Stands-Over-Bull, and Jeff Levine have resigned from Ammonite to become full-time employees with other firms. We wish them well in their new endeavors, and thank them for their contributions to Ammonite.

As a final update – we must report that Ammonite Managing Partner Skip Hobbs lost the election for President of the American Association of Petroleum Geologists in the Spring of 2006 (see What’s New posting of July 2005). It was a tremendous honor to have been nominated as a candidate for President-Elect, but it was just a tad too difficult for Texans to vote for a Connecticut Yankee as the future president of the AAPG.

Ammonite Senior Consultant David Abbott has been awarded Honorary Membership by the American Institute of Professional Geologists (AIPG). Honorary membership is awarded by AIPG to those who have an exemplary record of distinguished service to the geological profession and to the Institute. David, a resident of Denver, Colorado is well-known for his papers and lectures on professional ethics. Since 1995 he has authored a column titled “Professional Ethics & Practices” in The Professional Geologist publication of AIPG. Prior to becoming a consultant in 1996, Abbott worked 21 years as a geologist for the U.S. Securities and Exchange Commission, where his primary responsibility was to verify the geotechnical representations made in mining and petroleum company public securities offerings and other disclosures. He was a member of the SME’s Reserves and Resources committee that prepared the 1991 and 1999 versions of A Guide for Reporting Exploration Information, Mineral Resources, and Mineral Reserves. David is Ammonite’s principal mining expert. We congratulate him on this prestigious professional recognition.

Ammonite is pleased to announce that Dr. Robert Merrill has joined Ammonite in Houston as a Senior Exploration Consultant. Bob recently retired from the Samson Companies and has over thirty years experience in worldwide petroleum exploration and production. He is an experienced prospect generator and evaluator, and exploration manager. His expertise includes both conventional and unconventional clastic reservoirs, including fractured reservoirs and tight gas sands, as well as carbonates. Areas of expertise include the Rockies, West Texas Permian Basin, the Midcontinent, Gulf Coast onshore and offshore, and many international areas, including Central and Southeast Asia, Australia, the North Sea, and Latin America. Dr. Merrill is experienced in applying probabilistic methods to prospect evaluation and reserves estimation, and using this information for comprehensive portfolio management. Additionally, he has been involved with evaluating and optimizing geological and geophysical workflow to reduce cycle time from the origination of an idea to prospect drilling. Bob has taught courses on a range of subjects including structural geology, basin analysis and plate tectonics and geology for engineers.

Prior to becoming a consultant in 2005 and forming Catheart Energy, Inc., Dr. Merrill worked for the Samson Companies, Tulsa, Oklahoma, where he was Technical Manager of Geology from 2000-2002, and then Exploration Manager of Samson International from 2002-2005. From 1989-2000, Bob was employed by the Unocal Corporation, lastly as Chief Geologist 1997-2000 of Unocal’s Spirit Energy Division in Sugarland, Texas. As Chief Geologist of Spirit Energy he was responsible for quality assurance for a $600 million capital budget for the Deep Water Gulf of Mexico, Shelf and Onshore Gulf of Mexico and the Permian Basin. Prior to joining Unocal, Bob worked as an exploration geologist for the Cities Service Oil and Gas Corp. and then OXY USA, Inc. between 1974 -1989 in the Rockies, Permian Basin, and Midcontinent.

Dr. Merrill has a PhD and MS in Geology from Arizona State University and a BA in Geology from Colby College. He is a Fellow of the Geological Society of America, a Chartered Geologist with the Geological Society, and has served on committees for the American Geological Institute. Bob has served as Secretary and President of the American Institute of Professional Geologists and is an active member of the American Association of Petroleum Geologists, where he co-edited the Giant Fields of the Decade 1990 – 2000 book and edited Source and Migration: Processes and Techniques for Evaluation. Other publications include papers on risk analysis; deep, over-pressured gas in the Green River Basin; and origin and migration of oils, Wyoming/Utah/Idaho Overthrust belt. He was the Technical Coordinator for the 2006 AAPG National Convention in Houston.

Bob’s first assignment as an Ammonite consultant was to work with Dr. Richard Bishop in preparing a probabilistic analysis of the undeveloped reserves of a potential $55 million acquisition of a mature producing field offshore Texas. The engagement was on behalf of a major private equity fund to assist one of its portfolio companies in evaluating the acquisition. Bob and Dick Bishop reviewed field geological and seismic data; audited the deterministic reserve estimate of a major Houston-based engineering firm that had been prepared for the seller; identified the production and reserve risk variables; loaded and ran a Monte Carlo simulation of the PUD reserves; and then compared our probabilistic (P10-Pmean-P90) analysis with that of the engineering firm. This work has led to Ammonite’s retention by the operating company to advise them in setting up a probabilistic reserves and economic model for their portfolio of developed and undeveloped oil and gas properties.

December 1, 2005

In June 2005, Ammonite Resources was retained as advisors to Zahra Oil & Gas, a subsidiary of the Zahra Group Holding Company, Kuwait City, Kuwait. The scope of the engagement involves strategic planning, financial consulting, and assistance in new venture due diligence. Zahra Oil & Gas, now named Kuwait Energy Company, is the first private Kuwaiti oil and gas exploration and production company. Its senior management previously worked as the new venture acquisitions arm of Kufpec, the international division of Kuwait Oil Company. The company’s chairman is Dr. Abdul Mohsen Al Medej, former Oil Minister of Kuwait (1993-1996).

During September through November, Ammonite Senior Financial Consultant Greg Moroney, worked very closely with Zahra Oil & Gas in advising the firm on debt and equity financing for a competitive bid in excess of US$500 million, for producing assets in the Middle East. Greg traveled to Kuwait, London, Paris, and Dubai on behalf of Zahra. Ammonite’s John Powell worked closely with Greg and the client in building a complex economic model for the asset acquisition financing. Unfortunately, our client was not the successful bidder in the end.

In November, Ammonite Managing Partner Skip Hobbs traveled to Kuwait to work with Kuwait Energy and its Kuwaiti investment banking firm, to put together a private equity investor presentation. Skip also looked at two new venture acquisitions.

From left to right- Dr. Abdulsamme Bahbahani, VP Exploration and COO; Ms. Sara Akbar, CEO; Skip Hobbs, Ammonite Resources; Husain Kothari, CEO, Zahra Group Holdings; Dr. Manssour Aboukhamseen, Chairman, Zahra Group Holdings; and Firas Al Amiri, Manager Engineering.

Ammonite’s team of worldwide energy experts has been strengthened by the addition of four new senior consultants. These include Greg Moroney, joining us as Senior Consultant-Corporate Finance; Dick Bishop, Senior Exploration Advisor and Risk Manager; and Jeff Levine – Senior Consultant for Unconventional Gas Resources; and Steve Schamel, Senior Exploration Advisor.

After working 25 years in energy finance for Citicorp and Deutsche Bank, Greg Moroney brings tremendous experience and expertise in energy corporate finance to Ammonite. He provides his clients with extensive experience in raising capital for acquisitions and project developments from private sources as well as public capital markets, multilateral agencies (IFC, OPIC) and export credit agencies. While working at Deutsche Bank Securities from 1993 to 2002, Greg established and supervised a $250 million mezzanine finance program for the junior oil and gas sector. He also led and supervised teams that raised more than $10 billion of funding for upstream, downstream and pipeline projects throughout North and South America. Several of the transactions were awarded "Deal of the Year" by industry magazines including Project Finance International and Infrastructure Finance. Greg’s first assignment as an Ammonite is as an advisor to a newly formed private E&P company in Kuwait. He is advising the client on arranging the debt and equity components of a $500 million acquisition in the Middle East.

Dick Bishop has joined Ammonite in Houston after a career with ExxonMobil, where he held senior staff positions in international exploration and portfolio risk management. He has “seen the world” both as an explorationist and as a synthesizer of global exploration opportunities. During his career at Exxon, Dr. Bishop developed geological ‘yardsticks’ for play and prospect evaluation, developed economic and geological criteria to compare diverse exploration opportunities for new business development, contributed fundamental scientific concepts of hydrocarbon accumulation and diaper mechanics, and mapped at the reservoir to multi-basin scale. He is a guy who has a grand time doing petroleum geology. As an expert on risk analysis, Dr. Bishop will be helping Ammonite and our clients take a probabilistic approach to economic analysis, and portfolio management. Dick is a past president of both the Houston Geological Society and the American Association of Petroleum Geologists. Bishop’s first assignment as an Ammonite involved, together with colleague Mary Van Der Loop, performing the due diligence for a $20 million mezzanine financing for a horizontal development drilling program in the Permian Basin. The report included a statistical analysis of the expected production rates and reserves, and costs for the horizontal completions.

Ammonite’s expertise in unconventional gas resources has been greatly strengthened by the addition of Dr. Jeff Levine to Team Ammonite in Richardson, Texas. Jeff has over 30 years of industry experience, and is a well-known expert on coalbed methane through his extensive professional publications and industry in-house training workshops. Over the course of his career, he has worked in most of the coal and shale basins in the United States and Canada, as well as projects overseas, in the United Kingdom, Poland, China, Australia, and Colombia. Recently, Dr. Levine has been doing quite a bit of work in shale gas. He is a past-president and Editor of the Society for Organic Petrography, and the Southwest Section representative on the Advisory Board of the AAPG Division of Energy Minerals.

Steve Schamel has joined Ammonite as Senior Exploration Advisor in Salt Lake City, Utah. With more than 26 years of senior academic and petroleum industry experience, Dr. Schamel is an expert on domestic and international regional geological studies. He is also an expert on unconventional gas resources, and recently completed an assessment of the shale gas resources of the State of Utah under contract to the Utah Geological Survey. Steve holds degrees from Franklin and Marshall College (A.B.) and Yale University (Ph.D). Ammonite Managing Partner Skip Hobbs has known Steve since the late 1960’s when he was an undergraduate geology major at Yale, and Steve was a grad student Dr. Schamel is the author of numerous papers related to petroleum geology and reservoir characterization, and is a co-author of the recently published Thrustbelts: Structural Architecture, Thermal Regimes, and Petroleum Systems. He is presently the President-elect of the AAPG Rocky Mountain Section, and is a recent Executive Board Chair of the SPE Salt Lake Petroleum Section. In 2003, he organized the SPE-ATW Coalbed Gas Resources of Utah. Steve is a registered Utah Professional Geologist (5366337-2250).

The curriculum vitae of these accomplished experts is now posted on the Curriculum Vitae web page of the Ammonite website.

High oil and gas prices are not only keeping Ammonite busy, but have resulted in Ammonite consultants leaving the consulting world to become full-time employees of energy production and finance companies. Dick Gessinger has joined GE Capital Energy Services in Stamford, Connecticut; Jeff Lund has become Vice President of Exploration for Houston-based Access Exploration Corp.; Bob Dunn has joined Richardson Barr & Co. as Vice President in Houston; and Russell Stands-Over-Bull has rejoined BP Exploration in Houston. Ammonite thanks these gentlemen for their contributions to Ammonite and the firm’s clients. Even though they are no-longer official members of Team Ammonite, we will all remain in close contact and look for future opportunities where there may be synergies between Ammonite and the new employers.

Ammonite is honored to have Susan Eaton, our Canadian Senior Exploration Advisor, selected as a Gerson Lehrman Group Scholar. Susan has been a very active participant in the Gerson Lehrman Group’s Council of Energy Advisors, a service that provides security analysts access to industry experts for consultation. During the past three years, Ms. Eaton has advised the clients of New York-based Gerson Lehrman about the public and private companies involved in the Canadian Oil Sands, and on the emerging coalbed methane play in Western Canada. She has also provided insights for American and British investors into the conventional operations of Canadian E&P companies. To be selected as a GLG scholar, one must rank in the top 20% of client ratings for Gerson Lehrman advisors.

Ammonite Managing Partner Skip Hobbs has been selected by the Advisory Council and Executive Committee of the American Association of Petroleum Geologists to stand as a candidate for President Elect of the prestigious international professional society. When advised of his selection as a candidate, Hobbs responded that “this is a tremendous honor, particularly for one who resides in Connecticut, outside of the heart of the USA “Oil Patch”. I sincerely thank my peers for having such confidence in my leadership abilities and commitment to AAPG. I look forward to being in a position to implement the recommendations of the 2005 AAPG Strategic Plan to make the AAPG responsive to changing global macro-economic, political and demographic realities, and to make the association as relevant as possible to each member’s professional career.”

The election will be held by mailed and electronic ballot in the Spring of 2006. If elected, Hobbs would serve as AAPG President Elect in 2006 and as AAPG President in 2007. The president of the AAPG is effectively the CEO and spokesman of the 33,000 member international organization. Headquartered in Tulsa, Oklahoma, the AAPG has a staff of 60 employees who manage the association’s extensive geotechnical publication business, regional and annual conventions, education programs and member services. AAPG’s annual budget stands at $12.5 million.

A unique window of opportunity has emerged for the US oil and gas companies in Libya. It is hard to believe that the politics has changed so much so fast in that country in spite of the fact that the Libyan leadership has not changed. American companies are now welcome in Libya and are invited to become fully involved in developing and reviving the Libyan oil and gas industry, particularly in light of the fact that it represents 95% of their hard currency revenue.

The Lockerbie settlement was enough to satisfy the UN and cause their sanctions on the country to be lifted. But by voluntarily giving up their weapons of mass destruction, Libya has surprised the US and the world and opened the door for the lifting of the US sanctions.

Two types of opportunities for US companies are evolving. These are first, the re-introduction of the US multinational companies that were the foreign partners in the joint venture oil companies like Oasis. These are typically large US oil and gas companies like Exxon, Amerada Hess, Conoco, Oxy, Marathon, etc. Negotiations between the Libyans and these companies are currently ongoing.

The second type of opportunity deals with large tracts of prospective acreage and several associated discoveries that, at the time they were made, were deemed to be marginal or non-commercial.

Utilizing their uniquely qualified pool of experienced consultants, Ammonite Resources can act as representative to interested US companies, solely for the purpose of screening and evaluating available Libyan opportunities. If requested by participating companies, Ammonite can also advise its clients in the negotiations of the commitment work programs, economic terms and in the drafting of the production sharing contract with the Libyans.

Ammonite’s Libyan initiative will be led by Dr. Mohamed Abdel-Rahman. Prior to becoming a consultant in 1999, Dr. Abdel-Raham served as Regional Director, Middle East, Eurasia and N. Africa, Pennzoil Exploration and Production Company (1994-1999), and Exploration Manager, Middle East and N. Africa, Pennzoil Exploration and Production Company 1993-1994. While managing Pennzoil’s Middle East operations, Mo supervised a staff of 47 in offices in Egypt and Qatar, with annual budgets of $50 million. He is fluent in Arabic, and is a US citizen. Ammonite’s UK-based consultant David Bodecott, also has extensive North African experience. Ammonite’s Managing Partner Skip Hobbs studied the giant carbonate reservoirs in the Sirte Basin as part of his Masters Degree, and worked Libya for Amerada Hess in 1977-1980.

HOBBS IS KEYNOTE SPEAKER AT THE EXPLORATION MANAGEMENT FORUM OF THE CONFERENCE BOARD OF CANADA

Ammonite Managing Partner Skip Hobbs was the keynote luncheon speaker on December 6, 2004 at the Exploration Management Forum of the Conference Board of Canada in Calgary, Alberta. Hobbs’ presentation was titled “Strategies for Success and “Failure” in Oil and Gas Exploration: Identifying What Works and What Doesn’t”. The presentation discussed the organizational and management strategies that have historically led to exploration success and have assured consistently superior performance. The talk also highlighted the common characteristics of companies that have destroyed shareholder value. Skip’s PowerPoint presentation is posted on the Ammonite Website on the “Presentations” web page, and can be accessed directly by clicking here: VIEW



ARCHIVES:	(click to view)

12/01/04	Skip Hobbs Represents AAPG On National Energy Policy At The Energy Forum of The National Conference Of State Legislators

06/01/04	Jeff Lund Joins Ammonite In Houston

5/15/04	G. Warfield "Skip" Hobbs Elected to Executive Committee of the American Geological Institute

4/26/04	E&P Corporate Economic Model Launched By Ammonite Capital Partners, LP

2/9/04	Ammonite Capital Partners Hosts Dinner At Coronado Club In Houston During Nape Conference

8/13/03	Skip Hobbs receives AAPG John T. Galey Memorial Award

8/1/03	Team Ammonite Grows

12/22/02	Ammonite Resources Launches New Corporate Finance Advisory Service Dick Gessinger To Lead Initiative...


12/12/02	Dr. Timour Baichev Joins Ammonite Expanding Firm's Engineering Capabilities Particularly in Former Soviet Union...


10/23/02	Bob Dunn Joins Ammonite To Lead Houston Presence...

08/07/02	Ammonite Launches New Downstream Advisory Services...

07/27/02	Lesli J. Wood, PhD. Expert On Seismic Sequence Stratigraphy Joins Ammonite...

07/27/02	William C. McLeod Expert On Alternate Energy Technologies And The Impact Of Climate Change On The Petroleum Industry Becomes An Ammonite Associate...

05/15/02	Skip Hobbs Elected To The Board Of Directors Of The Yoho-Burgess Shale Foundation...

05/02/02	Mohamad Abdel-Rahman Joins Ammonite...

02/04/01	Fieldtrip To The Southwest Peninsula, Trinidad...

12/12/99	Strategies For Success In Oil & Gas Exploration