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Reserve Report
Practical Law Glossary Item 0-525-2525 (Approx. 3 pages)
Glossary
Reserve Report
Used by upstream or exploration and production companies in the oil and gas industry to determine the value of their oil and gas assets. These reports estimate the company's oil or gas reserves, the percentage or amount of these reserves that is recoverable, and over what length of time. These reports also take into account several other factors including commodity price assumptions, transportation costs, and operating costs.
Reserves are classified as either:
- Proved reserves. These are reserves that can be estimated with reasonable certainty to be commercially recoverable at specific times from known reservoirs and under current economic conditions, operating methods, and government regulations. These reserves can be further classified as:
- proved developed producing (PDP).
- proved developed non-producing (PDNP).
- proven undeveloped (PUD).
- Unproved reserves. These are reserves that are known but which cannot be estimated with reasonable certainty because of technical, contractual, economic, or regulatory uncertainties. These reserves may be further classified as probable or possible reserves.
E&P companies typically use reserve reports for internal planning purposes, to secure financing (especially borrowing base loans), sell their assets, or comply with their disclosure requirements under the Securities Exchange Act.
This report may be prepared by the company's reserve engineers or an independent petroleum engineer.
For more information on the use of reserve reports in credit agreements, see Practice Notes, Reserve Based Loans: Issues and Considerations and An Overview of Volumetric Production Payments (VPPs): Issues and Considerations.
For more information on reserves, see Article, Complying with the 2008 Amendments to the Oil & Gas Disclosure Rules: The First Wave of SEC Comment Letters.