Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must satisfy four criteria, they must be:
They are used in company valuations and counted as assets and are further categorized in accordance with the level of certainty around them.
How it’s important to us
Reserves are not a difficult concept, but their role is extremely important in forecasting production, valuing a company (for a potential merger or acquisition, for example) and planning a drilling schedule. Reserves can be generally categorized in three main types: proved, probable and possible. I will be covering these three concepts in more detail over the next few days.