InvestorsHub Logo
Followers 4
Posts 523
Boards Moderated 0
Alias Born 05/02/2008

Re: gqmixmaster post# 38432

Saturday, 08/09/2008 1:32:39 PM

Saturday, August 09, 2008 1:32:39 PM

Post# of 51429
From Wikipedia: http://en.wikipedia.org/wiki/Oil_exploration

Reserves and resources

Resources are hydrocarbons which may or may not be produced in the future. A resource number may be assigned to an undrilled prospect or an unappraised discovery. Appraisal by drilling additional delineation wells or acquiring extra seismic data will confirm the size of the field and lead to project sanction. At this point the relevant government body gives the oil company a production licence which enables the field to be developed. This is also the point at which oil reserves can be formally booked.

Definition of oil reserves

Oil reserves are primarily a measure of geological risk - of the probability of oil existing and being producible under current economic conditions using current technology. The three categories of reserves generally used are proven, probable, and possible reserves.

* Proven reserves - defined as oil and gas "Reasonably Certain" to be producible using current technology at current prices, with current commercial terms and government consent- also known in the industry as 1P. Some Industry specialists refer to this as P90 - i.e having a 90% certainty of being produced.
* Probable reserves - defined as oil and gas "Reasonably Probable" of being produced using current or likely technology at current prices, with current commercial terms and government consent - Some Industry specialists refer to this as P50 - i.e having a 50% certainty of being produced. - This is also known in the industry as 2P or Proven plus probable.
* Possible reserves - i.e "having a chance of being developed under favourable circumstances" - Some industry specialists refer to this as P10 - i.e having a 10% certainty of being produced. - This is also known in the industry as 3P or Proven plus probable plus possible.

Reserve booking

Oil and gas reserves are the main asset of an oil company - booking is the process by which they are added to the Balance sheet. This is done according to a set of rules developed by the Society of Petroleum Engineers (SPE). The Reserves of any company listed on the New York Stock Exchange have to be stated to the U.S. Securities and Exchange Commission. In many cases these reported reserves are audited by external geologists, although this is not a legal requirement. The U.S. Securities and Exchange Commission rejects the probability concept and prohibits companies from mentioning probable and possible reserves in their filings. Thus, official estimates of proven reserves will always be understated compared to what oil companies think actually exists. For practical purposes companies will use proven plus probable estimate (2P), and for long term planning they will be looking primarily at possible reserves.

Join the InvestorsHub Community

Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.