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Santa Maria Energy Corp – ‘S-4’ on 12/17/13 – EX-99.5

On:  Tuesday, 12/17/13, at 2:04pm ET   ·   Accession #:  1193125-13-475819   ·   File #:  333-192902

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/17/13  Santa Maria Energy Corp           S-4                   19:24M                                    RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-4         Registration of Securities Issued in a              HTML   2.89M 
                          Business-Combination Transaction                       
 2: EX-10.1     Material Contract                                   HTML    491K 
 3: EX-10.2     Material Contract                                   HTML     26K 
 4: EX-10.3     Material Contract                                   HTML     27K 
 5: EX-21.1     Subsidiaries of the Registrant                      HTML      8K 
 6: EX-23.1     Consent of Experts or Counsel                       HTML      8K 
13: EX-23.10    Consent of Experts or Counsel                       HTML      9K 
 7: EX-23.2     Consent of Experts or Counsel                       HTML      9K 
 8: EX-23.5     Consent of Experts or Counsel                       HTML      9K 
 9: EX-23.6     Consent of Experts or Counsel                       HTML     13K 
10: EX-23.7     Consent of Experts or Counsel                       HTML      9K 
11: EX-23.8     Consent of Experts or Counsel                       HTML      9K 
12: EX-23.9     Consent of Experts or Counsel                       HTML      9K 
14: EX-99.1     Miscellaneous Exhibit                               HTML     16K 
15: EX-99.2     Miscellaneous Exhibit                               HTML     16K 
16: EX-99.3     Miscellaneous Exhibit                               HTML   9.08M 
17: EX-99.4     Miscellaneous Exhibit                               HTML   2.00M 
18: EX-99.5     Miscellaneous Exhibit                               HTML    366K 
19: EX-99.6     Miscellaneous Exhibit                               HTML    491K 

Exhibit 99.5

		Gaffney, Cline & Associates, Inc.
		1300 Post Oak Blvd., Suite 1000
		Houston, TX 77056
		Telephone: +1 713 850 9955
		www.gaffney-cline.com
VKB/gjh/C2012.04/gcah.124.12		April 18, 2012

Mr. Ramon Elias

Santa Maria Pacific Holdings, LLC

2811 Airport Drive

Santa Maria, CA 93455

Reserve Evaluation Report as of December 31, 2011;

Orcutt Field, Careaga Tract, Monterey Formation,

Santa Barbara County, California, USA                   

Dear Mr. Elias:

This reserve evaluation has been prepared by Gaffney, Cline & Associates (GCA) at the request of Santa Maria Pacific Holdings LLC (SMPH) of Santa Maria, California to conduct an independent estimate of the Careaga Tract Monterey Formation reserves as of December 31, 2011¹. The Careaga Tract has two producing horizons², the Monterey and the shallower Diatomite that are owned respectively by SMPH’s wholly owned subsidiaries, Gitte-Ten, LLC, (GTL) and Orcutt Properties LLC (OPL). The corresponding operators of the respective formations are GTL and Santa Maria Pacific LLC (SMP) which is also a wholly owned subsidiary of SMPH. The present reserve estimates are compiled on the basis of SMPH’s stated working and net revenue interests (including reversions)

On the basis of technical and other information made available to us concerning this property unit, we hereby provide the reserve statement given in the table below:

Table 1: Statement of Remaining Hydrocarbon Volumes

Monterey Formation, Careaga Tract, Orcutt Field, California

as of December 31, 2011

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VKB/gjh/C2012.04/gcah.124.12 Santa Maria Pacific Holdings, LLC

Hydrocarbon liquid volumes represent crude oil that was estimated to be recovered during field separation and are reported in millions of stock tank barrels (MMstb) at standard conditions³. Natural gas volumes represent expected gas sales, and are reported in billions (10⁹) of cubic feet (Bcf) at standard conditions. Proved gas volumes are based on firm and existing gas contracts, and on the reasonable expectation that such gas sales contracts will be renewed on similar terms in the future. Royalties payable to the rightful royalty interest owners have been deducted from the net volumes.

The associated gas is currently used as fuel gas for steam generation in the concurrent Orcutt Diatomite development. Therefore the volumes of gas estimated to be produced from the Monterey Formation after December 2011 are included as reserves on the basis of their current and planned use either as fuel for steam generation for the diatomite development or for sales.

The Careaga Tract has about 75 wells and the tract production from the Monterey Formation is from 46 wells and is about 250 barrels of oil per day (bopd). GCA used decline curve analysis on a well basis to project developed production volumes.

The non-producing behind pipe and undeveloped production projections were partially based on estimates provided by SMPH on a well basis and were adjusted by GCA on the basis of analogous performance and in relation to the in-place estimates. A detailed technical discussion of analogous field performance was presented in the GCA (12/9/2009) report “Estimation of the Careaga Tract Monterey Formation Reserves; Orcutt Field, Santa Barbara County, California”. The technical merits and work process described in the above referenced report apply in principle to the present work with the exception of minor adjustments driven by the updated production volumes, tests and costs. The current evaluation was based on information provided by SMPH to GCA through December 31, 2011 and included such tests, procedures and adjustments as were considered necessary. All inquiries that arose during the course of the evaluation process were resolved to our satisfaction.

The commerciality and economic tests for the December 31, 2011 reserves volumes were based on SMPH’s future scenario of oil and gas which gives realized crude oil and gas sales prices as shown in the following table:

Table 2: Product Prices

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VKB/gjh/C2012.04/gcah.124.12 Santa Maria Pacific Holdings, LLC

This price scenario reflects the averages for 2011 derived from prices in effect on the first day of each month and are net of transportation and quality adjustments. Royalties vary by well between 12.5% and 19.55%. SMPH has advised that production from new wells would have a 1/6th royalty (16.67%) unless they are permitted as re-drills from existing wellbores, in which case SMPH expects that the 1/8th (12.5%) royalty would be applied. GCA has used the 1/8th royalty for new development wells as SMPH has advised that they plan to drill all the development wells from existing idle wellbores.

Future capital costs were derived from development plans prepared by SMPH for the field. Recent historical operating expense data were utilized as the basis for operating cost projections. The operating cost model was adopted by GCA and it conforms with the 2012 forecasted costs that includes a total operating cost of US$2.697 MM. A cost breakdown (as Expenses) was supplied by SMPH for the Monterey reservoir to develop a profile of expenses from the as of date (December 31, 2011) to the end of life (EOL) of the economic forecast for the Monterey reservoir. A schematic of the Total Expense breakdown is provided in Figure 1.

Figure 1: Total Expense breakdown and general schematic of expenses over time

By forecasting both well and field fixed costs, a fixed cost base can be maintained and held constant to the EOL of the economic forecast. At the same time, the total fixed well costs will naturally decrease as individual wells become uneconomic. The first step in the process is to take several years of historical lease operating statements (LOS) and sort fixed and variable expenses from the total expenses. Historical total expenses were provided and analyzed by the client. The economic unit costs identified by SMPH for all cases except the horizontal wells are shown below:

Fixed Field: US$53,917/month

Fixed Well: US$1,160/month/well

Variable Water unit cost: US$0.20/bblw

Variable Oil unit cost: US$15.02/bblo

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VKB/gjh/C2012.04/gcah.124.12 Santa Maria Pacific Holdings, LLC

SMPH also identified 9 workover opportunities that will cost in total US$0.398 MM. These correspond to the PDNP behind pipe potential once the workovers are completed. The first intervention is scheduled to start in October 2012.

In 2011, the first horizontal well (90-31-rd) of the 15-well horizontal program was drilled. Well 90-31-rd has a lateral length of 2,040 feet. Because of the uncertainty associated with the lower than predicted oil production performance of well 90-31-rd which was originally based on analogue horizontal wells in the Monterey Formation, the original development plan was adjusted. Eight (8) horizontal wells are included in the proved undeveloped category as these are committed to be drilled by SMPH. Six (6) horizontal wells are included in the contingent resources class, depending on the performance of the initial eight wells. For the horizontal wells, the economic unit costs defined by SMPH are as shown above, with the exception of the following:

Variable Oil unit cost, which is US$5.27/bblo

GCA did not apply any price or cost escalations or any inflation-based adjustments in the yearly cash flow projections that are presented in Appendix I. Please note that the Net Present Values are presented using a 9% discount rate, as requested by SMPH. These cash flow estimates were used to determine the economic limit of the associated reserves and to determine the commerciality of the project and do not represent an opinion of asset value.

It is GCA’s opinion that the estimates of total remaining recoverable hydrocarbon liquid volumes as of December 31, 2011 are, in the aggregate, reasonable and have been prepared in accordance with the reserves definitions in the Petroleum Resources Management System (PRMS) approved by the Society of Petroleum Engineers, World Petroleum Council, American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers in March 2007. A brief description of these definitions is provided in Appendix III.

This assessment has been conducted within the context of GCA’s understanding of SMPH’s petroleum property rights as represented by SMPH management. GCA is not in a position to attest to property title, financial interest relationships or encumbrances thereon for any part of the appraised properties or interests.

There are numerous uncertainties inherent in estimating reserves and resources, and in projecting future production, development expenditures, operating expenses and cash flows.

Oil and gas reserve engineering and resource assessment must be recognized as a subjective process of estimating subsurface accumulations of oil and gas that cannot be measured in an exact way. Estimates of oil and gas reserves or resources prepared by other parties may differ, perhaps materially, from those contained within this report. The accuracy of any Reserve or Resource estimate is a function of the quality of the available data and of engineering and geological interpretation. Results of drilling, testing and production that post-date the preparation of the estimates may justify revisions, some or all of which may be material. Accordingly, Reserve and Resource estimates are often different from the quantities of oil and gas that are ultimately recovered, and the timing and cost of those volumes that are recovered may vary from that assumed.

For this assignment, GCA served as independent Reserve evaluators. The firm’s officers and employees have no direct or indirect interest holding in the property unit evaluated. GCA’s remuneration was not in any way contingent on reported reserve or resource estimates.

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VKB/gjh/C2012.04/gcah.124.12 Santa Maria Pacific Holdings, LLC

Finally, please note that GCA reserves the right to approve, in advance, the use and context of the use of any results, statements or opinions expressed in this report. Such approval shall include, but not be confined to, statements or references in documents of a public or semi-public nature such as loan agreements, prospectuses, reserve statements, press releases, etc. This report has been prepared for SMPH and should not be used for purposes other than those for which it is intended.

Very truly yours,

GAFFNEY, CLINE & ASSOCIATES, INC.

Vivian K. Bust, PE, RG

Professional Petroleum Engineer CA 1837

Project Manager

Rawdon J. H. Seager

Principal - Reservoir Engineering

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APPENDIX I:

Yearly Cash Flow Projections