Evaluating Reserves in Resource Plays: Strategies and Pitfalls

Bob Barg
Netherland, Sewell and Associates, Inc., Dallas, TX

Unconventional resources and reserves continue to increase in importance as a future source of gas production. Since resource plays tend to cover large areas of land, the magnitude of proved, probable and possible reserve bookings can be very large with a limited amount of data. SEC reserve definitions for proved undeveloped reserves require future locations to directly offset existing wells, be drilled in a reasonable period of time, be economic under existing economic conditions, and have reasonable certainty of recovering more reserves than estimated as of the date of the report. Even with these restrictive definitions, proved undeveloped reserves can be much greater than producing reserves in resource plays due to the leveraging effect of offset drilling locations. Probable and possible reserve levels can be much higher once step-out and infill locations are considered. In highly developed areas of resource plays where downspacing is occurring and well interference is expected, the OGIP estimates and overall recovery factors become of much greater importance. Therefore, emphasis must be placed in obtaining high quality data on existing wells. Reserve analysis requires an understanding of the different methodologies available, geologic trends, petrophysical parameters and OGIP estimating, historical and future estimated well performance, depletion effects and analysis, sensitivity analysis to estimates, and reserve classification. Small errors in estimating reserves for existing wells can lead to large revisions of future locations in all reserve categories.

AAPG Search and Discovery Article #90092©2009 AAPG Rocky Mountain Section, July 9-11, 2008, Denver, Colorado