How Low Should You Go: A Method to Calibrate Estimates of P99 Prospect Reserves
A common question in determining reserves distributions is how to estimate the low end of the curve or, as commonly referenced, the P99. We would like to propose a method to determine whether the P99 is being selected appropriately and how to adjust it if it is not. The method requires pre and post drill data including both reserves and parameter distributions (e.g., area, average net pay, net to gross ratio). The technique assumes that we can successfully estimate the high side of the distribution, and if we anchor on this high side estimate, a P99 value can be determined by applying an appropriate variance (P10/P90 ratio) that represents the level of uncertainty in the prospect. The technique uses a range of P10/P90 ratios to test the pre and post drill data for the validity of the pre-drill P99 estimates. Once a range is identified, it becomes the target P10/P90 ratio for future estimates of pre-drill distributions. The method was applied to data from Chevron and Texaco to calibrate the approach for estimating the P99. Examples indicate an acceptable P10/P90 range of 8 to 12 for these data. The process was tested over a range of years from 1990 through 2004 and supports the validity of the process. We would like to stress, however, that the resultant P10/P90 ratio of 8 to 12 is appropriate for the data set tested. Other data sets (e.g., DHIs, frontier wildcats) could have very different results. The method, however, should apply to all.