Oil and Gas Reserve Information

There are numerous uncertainties inherent in estimating quantities of proved crude oil and natural gas reserves. Crude oil and natural gas reserve engineering is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be precisely measured. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of crude oil and natural gas that are ultimately recovered.

Estimates of our crude oil and natural gas reserves and present values as of December 31, 2018, 2017, and 2016, were prepared by Netherland, Sewell & Associates, Inc., independent reserve engineers.

A summary of changes in estimated quantities of proved reserves for the years ended December 31, 2018, 2017, and 2016 is as follows:



	Gas		Oil		NGLS		Total
	(MMcf)		(Mbbl)		(Mbbl)		(MMcfe) (1)
Company
Balance at January 1, 2016	188		6		—		224
Revisions of quantity estimate	196		3		8		262
Extensions and discoveries	—		—		—		—
Production	(54	)	(2	)	—		(66	)
Balance at December 31, 2016	330		7		8		420
Revisions of quantity estimate	109		2		3		139
Extensions and discoveries	—		—		—		—
Production	(47	)	(2	)	—		(59	)
Balance at December 31, 2017 (2)	392		7		11		500
Revisions of quantity estimate	(269	)	(2	)	(10	)	(341	)
Extensions and discoveries	—		—		—		—
Production	(34	)	(1	)	—		(40	)
Balance at December 31, 2018 (3)	89		4		1		119

Company’s share of Laramie Energy
Balance at January 1, 2016, as revised	127,274		480		3,850		153,254
Revisions of quantity estimate	28,195		53		526		31,672
Extensions and discoveries	638		1		19		758
Acquisitions and divestitures	168,887		492		4,701		200,045
Production	(15,192	)	(59	)	(552	)	(18,858	)
Balance at December 31, 2016, as revised	309,802		967		8,544		366,871
Revisions of quantity estimate	1,344		211		(434	)	3
Extensions and discoveries (2)	—		—		—		—
Acquisitions and divestitures	—		—		—		—
Production	(18,104	)	(71	)	(608	)	(22,178	)
Balance at December 31, 2017 (2)	293,042		1,107		7,502		344,696
Revisions of quantity estimate	47,871		732		5,602		85,875
Extensions and discoveries	—		—		—		—
Acquisitions and divestitures	22,391		12		191		23,609
Production	(25,513	)	(106	)	(712	)	(30,421	)
Balance at December 31, 2018 (3)	337,791		1,745		12,583		423,759

Total at December 31, 2018	337,880		1,749		12,584		423,878

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(1)	MMcfe is based on a ratio of 6 Mcf to 1 barrel.

(2)

During 2017, the Company’s estimated proved reserves, inclusive of the Company’s share of Laramie Energy’s estimated proved reserves, decreased by 22,095 MMcfe or approximately 6%. Production volumes related to our share of Laramie Energy’s estimated proved reserves resulted in a decrease of 22,178 MMcfe. Beginning in 2017, Par has decided to base its determination of Laramie Energy proved undeveloped reserves on only a two year drilling and three year completion time horizon, which has resulted in negative revisions to our proved reserves of 17,216 MMcfe during 2017. The Company’s share of Laramie Energy’s revisions of quantity estimate also includes 30,362 MMcfe of positive revisions associated with 44 probable locations that were converted to proved developed reserves during 2017. These 44 locations converted to proved reserves during 2017 were not considered extensions because they were drilled in proved areas that are slightly offset to other proved locations. The remaining decrease in estimated proved reserves was due to performance and other changes to the Company’s share of Laramie Energy’s proved developed producing and developed non-producing reserves.

(3)

During 2018, the Company’s estimated proved reserves, inclusive of the Company’s share of Laramie Energy’s estimated proved reserves, increased by 78,682 MMcfe or approximately 23%. The Company’s share of Laramie Energy’s revisions of quantity estimate increased primarily due to: 1) additions of 60,679 MMcfe of proved undeveloped reserves primarily located within Laramie Energy's northern acreage, 2) 11,614 MMcfe of positive revisions associated with 13 probable locations that were converted to proved developed reserves during 2018, and 3) 13,582 MMcfe of positive revisions due to performance improvements and other changes to the Company’s share of Laramie Energy’s proved developed and undeveloped reserves. Production volumes related to our share of Laramie Energy’s estimated proved reserves resulted in a decrease of 30,421 MMcfe. During 2018, Laramie Energy closed on a purchase and contribution agreement with an unaffiliated third party that contributed 23,609 MMcfe of proved developed reserves in the Piceance Basin.

A summary of proved developed and undeveloped reserves for the years ended December 31, 2018, 2017, and 2016 is presented below:



	Gas	Oil	NGLS	Total
	(MMcf)	(Mbbl)	(Mbbl)	(MMcfe) (1)
December 31, 2016
Proved developed reserves
Company	330	7	8	420
Company’s share of Laramie Energy	159,500	516	4,349	188,690
Total	159,830	523	4,357	189,110
Proved undeveloped reserves
Company	—	—	—	—
Company’s share of Laramie Energy	150,302	451	4,195	178,181
Total	150,302	451	4,195	178,181

December 31, 2017
Proved developed reserves
Company	392	7	11	500
Company’s share of Laramie Energy	174,464	658	4,589	205,946
Total	174,856	665	4,600	206,446
Proved undeveloped reserves
Company	—	—	—	—
Company’s share of Laramie Energy	118,578	449	2,913	138,750
Total	118,578	449	2,913	138,750

December 31, 2018
Proved developed reserves
Company	89	4	1	119
Company’s share of Laramie Energy	256,363	1,420	8,868	318,091
Total	256,452	1,424	8,869	318,210
Proved undeveloped reserves
Company	—	—	—	—
Company’s share of Laramie Energy	81,428	325	3,715	105,668
Total	81,428	325	3,715	105,668

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(1)	MMcfe is based on a ratio of 6 Mcf to 1 barrel.



	Price per MMbtu		WTI per Bbl
Base pricing, before adjustments for contractual differentials (Company and Laramie Energy): (1)
December 31, 2016	$	2.29	$	42.75
December 31, 2017	2.68		51.34
December 31, 2018	2.47		65.56

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(1)	Proved reserves are required to be calculated based on the 12-month, first day of the month historical average price in accordance with SEC rules. The prices shown above are base index prices to which adjustments are made for contractual deducts and other factors.

Future net cash flows presented below are computed using applicable prices (as summarized above) and costs and are net of all overriding royalty revenue interests.



	December 31,
	2018			2017			2016
	(in thousands)
Company
Future net cash flows	$	398		$	1,802		$	1,154
Future costs
Production	123			902			713
Development and abandonment	35			—			2
Income taxes (1)	—			—			—
Future net cash flows	240			900			439
10% discount factor	(110		)	(328		)	(154		)
Discounted future net cash flows	$	130		$	572		$	285

Company’s share of Laramie Energy
Future net cash flows	$	1,283,890		$	1,026,005		$	905,607
Future costs
Production	583,112			491,748			462,684
Development and abandonment	93,546			109,248			136,224
Income taxes (1)	—			—			—
Future net cash flows	607,232			425,009			306,699
10% discount factor	(288,130		)	(209,188		)	(165,557		)
Discounted future net cash flows	$	319,102		$	215,821		$	141,142

Total discounted future net cash flows	$	319,232		$	216,393		$	141,427

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(1)

No income tax provision is included in the standardized measure of discounted future net cash flows calculation shown above as we do not project to be taxable or pay cash income taxes based on its available tax assets and additional tax assets generated in the development of its reserves because the tax basis of its oil and gas properties and NOL carryforwards exceeds the amount of discounted future net earnings.

The principal sources of changes in the standardized measure of discounted net cash flows for the years ended December 31, 2018, 2017, and 2016 are as follows (in thousands):



	Company			Company's Share of Laramie Energy			Total

Balance at January 1, 2016	$	192		$	39,605		$	39,797
Sales of oil and gas production during the period, net of production costs	(62		)	(7,979		)	(8,041		)
Acquisitions and divestitures	—			81,066			81,066
Net change in prices and production costs	(20		)	2,994			2,974
Changes in estimated future development costs	14			(8,575		)	(8,561		)
Extensions, discoveries, and improved recovery	—			231			231
Revisions of previous quantity estimates, estimated timing of development and other	142			16,995			17,137
Previously estimated development and abandonment costs incurred during the period	—			12,805			12,805
Accretion of discount	19			4,000			4,019
Balance at December 31, 2016	285			141,142			141,427
Sales of oil and gas production during the period, net of production costs	(28		)	(29,911		)	(29,939		)
Net change in prices and production costs	(60		)	35,597			35,537
Revisions of previous quantity estimates, estimated timing of development and other	346			37,692			38,038
Previously estimated development and abandonment costs incurred during the period	—			17,187			17,187
Accretion of discount	29			14,114			14,143
Balance at December 31, 2017	572			215,821			216,393
Sales of oil and gas production during the period, net of production costs	(127		)	(47,165		)	(47,292		)
Acquisitions and divestitures	—			35,182			35,182
Net change in prices and production costs	20			(1,365		)	(1,345		)
Revisions of previous quantity estimates, estimated timing of development and other	(392		)	54,311			53,919
Previously estimated development and abandonment costs incurred during the period	—			40,736			40,736
Accretion of discount	57			21,582			21,639
Balance at December 31, 2018	$	130		$	319,102		319,232