DENVER, Colorado – It is not often that the SEC will accept a near infinite reserves booking for an oil property in the United States. But thanks to the sharp minds at the Securities and Exchange Commission, a plan to do just that by junior operator Perpetual Resources was thwarted by the Washington, DC-based regulator.
After a thorough investigation into the dubious reserves submission, the commission discovered that the inordinately high proposed proven reserves booking of 689 million barrels of oil equivalent for the company was made in honest error. The SEC deduced this in part because nobody of sound mind and judgement, who understands the reserves process, could possibly book reserves of that magnitude to a 30-year old field containing 15 wells with an aggregate production of 278 boepd, and field-level water cut of 97.4%.
According to the SEC’s investigative report, it appeared that the reservoir engineer responsible or the submission (whose name is being withheld due to pending litigation), had the oil and water data sets mixed up in his Decline Analysis software program.
Well, it took me a while to figure it out, but somebody on my team, I think it was the production engineer, swapped the colour and names between the oil and water data sets in my program, leading me to believe that our wells’ oil cut was increasing with time. Seemed odd, but I figured it could happen.
The junior reservoir engineer, who was relatively new at the reserves game, attributed the apparently excellent performance to some mysterious natural drive mechanism that has yet to be accurately described. He continued, “I really thought that I was onto something with this increasing oil cut phenomenon, and I was looking forward to submitting an SPE abstract for the topic, but it looks like I have been proved wrong.”
The SEC had originally arranged to have the reservoir engineer charged with fraud, but after second thought all charges were dropped. The SEC filed this submission under the category called “gross misunderstanding and ignorance of how oil reservoirs work.”