Proved oil and gas reserves.
Proved oil and gas reserves are those quantities of oil and gas, which,
by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be
economically producible from a given date forward, from known reservoirs, and under existing
economic conditions, operating methods, and government regulations prior to the time at which
contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably
certain, regardless of whether deterministic or probabilistic methods are used for estimation. The
project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain
that it will commence the project, within a reasonable time.
The area of the reservoir considered as proved includes all of the following: (i) the area identified by
drilling and limited by fluid contacts, if any; and (ii) adjacent undrilled portions of the reservoir that can,
with reasonable certainty, be judged to be continuous with it and to contain economically producible oil
and gas on the basis of available geoscience and engineering data.
In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest
known hydrocarbons as seen in a well penetration unless geoscience, engineering or performance
data and reliable technology establish a lower contact with reasonable certainty.
Where direct observation from well penetrations has defined a HKO elevation and the potential exists
for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of
the reservoir only if geoscience, engineering or performance data and reliable technology establish the
higher contact with reasonable certainty.
Reserves which can be produced economically through application of improved recovery techniques
(including, but not limited to, fluid injection) are included in the proved classification when:
(i) successful testing by a pilot project in an area of the reservoir with properties no more favorable
than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous
reservoir or other evidence using reliable technology establishes the reasonable certainty of the
engineering analysis on which the project or program was based; and (ii) the project has been
approved for development by all necessary parties and entities, including governmental entities.
Existing economic conditions include prices and costs at which economic producibility from a reservoir
is to be determined. The price shall be the average price during the twelve-month period prior to the
ending date of the period covered by the report, determined as an unweighted arithmetic average of
the first-day-of-the-month price for each month within such period, unless prices are defined by
contractual arrangements, excluding escalations based upon future conditions.
Proved reserve additions.
The sum of additions to proved reserves from extensions, discoveries,
improved recovery, acquisitions and revisions of previous estimates.
Reasonable certainty.
If deterministic methods are used, reasonable certainty means a high degree
of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at
least a 90% probability that the quantities actually recovered will equal or exceed the estimate. A high
degree of confidence exists if the quantity is much more likely to be achieved than not, and, as
changes due to increased availability of geoscience (geological, geophysical and geochemical),
engineering and economic data are made to estimated ultimate recovery with time, reasonably certain
estimated ultimate recovery is much more likely to increase or remain constant than to decrease.
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