A primer on Reserves

[sl6886]

Dan,

I'm wondering if you have a particular book or resource that you could point to that would help a non-energy person understand the definitional differences between the various reserves (proven, proven and developing, probable, NPV10, etc.). I

Thanks

[dan_s]

Proved oil and gas reserves ("P1") are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made.

Basic definitions: https://www.investopedia.com/ask/answer ... sector.asp

Just Google "Proven Oil Reserves" and lots of reference materials come up.

PV10 is the present value of future cash flow (net of all costs and operating expenses) discounted by 10% for each class of reserves. SEC rules are super conservative, so (PV10 - Debt) / common share count is the lowest a stock should trade at. PV10's as of December 31, 2020 are grossly under-valued because they are based on 2020 oil, gas and NGL price.

MY TAKE: Probable Reserves ("P2") are very close to P1 in the shale plays because so much of the large basins have now been de-risked.