A Practical Solution to Describe the Proved Area within a Resource Play Using Probabilistic Methods

Abstract

AbstractThe United States Security and Exchange Commission (SEC 2008) adopted revisions to the oil and gas reporting disclosure rules on December 29, 2008 that included expanded definitions to allow entities to disclose reserves using probabilistic methods. These benchmark rule changes, titled Modernization of Oil and Gas Reporting; Final Rule are coincidently timed with the rapid discovery and development of world class resource play reservoirs. These resource plays are favorable subjects for probabilistic evaluation due to their shear size, well count, projected future activity and significant current and future reserve impact.The modernized rules create new opportunities in reserve disclosure as well as new potential pitfalls. Probabilistic methods are not required to be implemented for reporting; however, if used they need to adhere to sound statistical principles to serve the purpose of the new rules and yield robust results. This paper presents a new approach that incorporates probabilistic principles into a practical method for the first step in reporting undeveloped reserves in a resource play; empirically describing the proved area.The practical method presented here does not use a probabilistic approach previously shown by others (Patricelli, 1995), (Mata, 1997), (Moore 1999), (Acuna, 2000), (PRMS, 2009). Additionally it does not rely on Monte Carlo simulations for input values based on geologic variables expressed as Probability Distribution Functions (PDF). Instead, the method employs production statistics of the existing Proven Developed Producing (PDP) well set within the play.The analog to future wells involves the existing PDP wells in the same geologic and geographic portion of the play being evaluated. Empirically the step that describes the proved area is controlled by statistical rules for sample size and the principle of aggregation. This approach is likely only applicable to resource plays. Other factors such as gas-in-place and reasonable recovery factors must also be considered to insure the results are reasonable.The probabilistic reserve evaluation method requires a comprehensive level of support documentation. The objective of this paper is to present the principles and methods that create a robust, reliable, yet simplistic way to evaluate the proved area component of reserves evaluation using probabilistic methods for resource plays. Proved, probable, and possible reserves are allowed to be disclosed under the new SEC rules. However this paper is limited in scope to proved reserves. Explanations are provided to show how SEC definitions and probabilistic concepts are integrated into the proposed method. The Fayetteville Shale is used throughout the paper to demonstrate the application.