Oil and Gas Reserve Reports: A Basic Overview and Key Issues for Practitioners

Reserve reports for oil and (natural) gas production companies (producers) form the fundamental basis for valuation analyses. Reserve engineering by a producer is a complex and often subjective process through which the company itself and many constituents, including shareholders and lenders, make c...

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Bibliographic Details
Published in:American Bankruptcy Institute journal 2010-05, Vol.29 (4), p.52
Main Authors: Pinsonnault, Scott M, Wright, Arthur J, Tubb, Emily
Format: Article
Language:English
Subjects:
Capital costs
Capital expenditures
Data analysis
Debt
Disclosure
Economic conditions
Engineering
Engineers
Equity financing
Estimates
Financial analysis
Geology
Natural gas reserves
Oil reserves
Prices
Reporting requirements
Third party
Uncertainty
Valuation
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Summary:Reserve reports for oil and (natural) gas production companies (producers) form the fundamental basis for valuation analyses. Reserve engineering by a producer is a complex and often subjective process through which the company itself and many constituents, including shareholders and lenders, make critical investment decisions. The purpose of this article is to provide an overview of the technical aspects of reserve reports, how they are generated, what they are used for and how they can factor into debtor and creditor behavior. All reserve estimates involve some degree of uncertainty, which depends on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. Reserve reports are valuable in that they form a comparable basis for analysis of oil and gas assets, but understanding the nuances and potential source of error or subjectivity is critical to the success of using this valuable tool.
ISSN:1931-7522