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Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Oil How Oil Cos. Treat Reserves on a Balance Sheet. Partner Links. Recoverable reserves are oil and gas reserves that are economically and technically feasible to extract at the existing price of oil. Possible reserves are those unproved reserves which analysis of geological and engineering data suggests are less likely to be recoverable than probable reserves.
In general, possible reserves may include 1 reserves which, based on geological interpretations, could possibly exist beyond areas classified as probable, 2 reserves in formations that appear to be petroleum bearing based on log and core analysis but may not be productive at commercial rates, 3 incremental reserves attributed to infill drilling that are subject to technical uncertainty, 4 reserves attributed to improved recovery methods when a a project or pilot is planned but not in operation and b rock, fluid, and reservoir characteristics are such that a reasonable doubt exists that the project will be commercial, and 5 reserves in an area of the formation that appears to be separated from the proved area by faulting and geological interpretation indicates the subject area is structurally lower than the proved area.
Developed: Developed reserves are expected to be recovered from existing wells including reserves behind pipe. Improved recovery reserves are considered developed only after the necessary equipment has been installed, or when the costs to do so are relatively minor.
Developed reserves may be subcategorized as producing or non-producing. Producing: Reserves subcategorized as producing are expected to be recovered from completion intervals which are open and producing at the time of the estimate. Improved recovery reserves are considered producing only after the improved recovery project is in operation.
Non-producing: Reserves subcategorized as non-producing include shut-in and behind-pipe reserves. Shut-in reserves are expected to be recovered from 1 completion intervals which are open at the time of the estimate but which have not started producing, 2 wells which were shut-in for market conditions or pipeline connections, or 3 wells not capable of production for mechanical reasons. Behind-pipe reserves are expected to be recovered from zones in existing wells, which will require additional completion work or future recompletion prior to the start of production.
Undeveloped Reserves: Undeveloped reserves are expected to be recovered: 1 from new wells on undrilled acreage, 2 from deepening existing wells to a different reservoir, or 3 where a relatively large expenditure is required to a recomplete an existing well or b install production or transportation facilities for primary or improved recovery projects. By continuing to use this site you consent to the use of cookies. Learn More » I Understand. Petroleum Reserves Definitions [ Archive] Reserves derived under these definitions rely on the integrity, skill, and judgment of the evaluator and are affected by the geological complexity, stage of development, degree of depletion of the reservoirs, and amount of available data.
Measure content performance. Develop and improve products. List of Partners vendors. Probable reserves are crude oil reserves calculated to be at least 50 percent likely to be recovered through drilling.
Recovery probabilities help estimate the present and future value of assets owned or operated by firms in the oil and gas sector. Probable reserves make up a portion of the oil present in an area surveyed by an oil and gas exploration firm.
Firms use the results of a seismic survey of a piece of land to determine the amount of oil available beneath that land. The companies then categorize the amount of oil based upon an estimate of the relative ease or difficulty of getting the oil or gas out of the ground. Any combination of regulatory, economic, and technological challenges could reduce the likelihood that a firm can profitably extract the reserve. For example, reserves may appear to be a good fit with an established commercial recovery method that a firm does not currently have in use on the site, or had not initially planned to use.
In that case, the firm would classify the reserves as probable, since their recovery would depend on the planning and execution of a new project, which may or may not be economically viable. In this case, even though the reserves would almost certainly be available to the company, the economics involved in extracting them might reasonably lead the firm to decide not to bother with the extraction.
The Society of Petroleum Engineers recognizes three main categories of oil reserves based upon how likely an exploration and drilling company believes they are to be extracted. FMV is the price that an item would sell for on the open market.
The process involves the application of a discount rate to expected cash flow from reserves based on the category into which they fall. We are now seeing more and more companies beginning to report 3P reserves, especially from the junior end of the company spectrum.
Junior companies will typically buy into prospective fields, spend their first few years in existence trying to prove commerciality, and then either get acquired by or merge with a bigger player, or are joined in their commercially viable oil or gas project by a bigger player who typically takes on most of the operating costs — known as a farm-in partner. So typically, only a high level overview is possible, which results in little or no proved or probable reserves being booked, but maybe a high amount of possible reserves.
The TSX-V exchange in Canada and the AIM exchange in London have many companies that fit this description, and 3P reserves and the hundreds of metrics Evaluate Energy and CanOils provide alongside them will be vital to any analysis of these emerging oil and gas players. To find out more about the financial and operating data we provide, click here.
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