CAMBRIDGE, Massachusetts – After Royal Birch Shill took a $2.1B write-down in the second quarter of 2013, related mostly to improperly booked reserves in its tight oil assets in North America, many companies are reassessing their portfolios and reserves to avoid taking similar impairments.
In an effort to help companies and investors better understand oil reserves bookings, the North American Oil Reserves Association (NAOA) has called upon a team of estatisticians from Harvard and Yale to analyze current reserves in an effort to answer the age-old questions: What are oil reserves? And what do the standard reserves classifications really mean?
The team of 7 scientists analyzed trillions of terabytes of publically available quantitative and qualitative reserve booking information from Canada and the United States. And after the 5-week study period, the group was shocked with the results of the study. Dr. Sigourney Berrybush, the chief estastician on the study, put it quite bluntly at a press conference held at the Center for Oil Classification Knowledge,
It is pleasure for me to come to COCK today to present our findings. My team has spent just over a month data-mining vast amounts of booked reserves and their classifications, coupled with hiring a special team of engineers, geologists, technologists, and accountants from Calgary-based Poukete Engineering to measure the oil in place in the ground, and what we have found is shocking!
99.8% of booked oil reserves are waaaaaaay off target! The data does not lie, I can show it to you if you’d like.
According to the study, that was published this morning in the Journal of Nature, 87.56% of companies have their Proven reserves booked at closer to a P17, and their Contingent Resource Proved Plus Possible bookings coming in, on average, at a 1-P90^rt4.5 percentile, which, according to the COCK, is very inaccurate.
During the study, a number of unnamed senior reservoir engineers and reserves evaluators from across the continent were asked to describe standard reserve classifications to the best of their understsanding, while hooked up to a TruthTranslator 2000 machine. The machine, while connected to the subject being interviewed, is able to analyze the subject’s answer and output the true meaning of what is being said.
The results from the TruthTranslator sub-study were summarized and provided to 2P News, and included here:
Q1. What is a Proven reserve?
- Acceptable Answer: Oil that has a 90% certainty of being produced. Also known as Proven (or 1P).
- TruthTranslation: We should be able to get this stuff out of the ground, and we’re playing it pretty safe. But you never know.
Q2. What is a Probable reserve?
- Acceptable Answer: Oil that has a 50% certainty of being produced. Also known as Proved + Probable (or 2P).
- TruthTranslation: Oh, I thought this was a Proven reserve all along! There is a better chance I would go without beer for a month than producing that oil.
Q2. What is a Possible reserve?
- Acceptable Answer: Oil that has a 10% certainty of being produced. Also known as Proved + Probable + Possible (or 3P).
- TruthTranslation: I’d have a better chance getting lucky with a Barista from the local Starbucks. (these were engineers, lets not set the bar to high)
In light of the TruthTranslator 2000 findings, the SEC in the United States, and its counterparts in BC, Alberta, Saskatchewan, and Manitoba plan to send reserves auditors to a random smattering of E&P companies within their jurisdiction to spot check bookings.