Resources and Reserves Definitions – The Relevant Terminology Used for Analysing Oil and Gas Companies

In order to distinguish the different resources and reserves definitions I have created this page as a reference for understanding the relevant terminology used for analysing oil and gas companies.

The Society of Petroleum Engineers (SPE), the American Association of Petroleum Geologists (AAPG), the World Petroleum Council (WPC) and the Society of Petroleum Evaluation Engineers (SPEE) have agreed upon the following resources and reserves definitions as published in the Petroleum Resources Management System1:

Prospective Resources: are estimated quantities of hydrocarbons from undiscovered accumulations on the basis of indirect evidence (i.e. the oil or gas structure identified has not yet been drilled).

Contingent Resources: are those potentially recoverable quantities of hydrocarbons from known accumulations which are not currently considered to be commercially recoverable due to one or more contingencies.

Reserves: estimates of volumes of hydrocarbons anticipated to be commercially recoverable from a given date forward, under existing economic conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date).

Proved Reserves: can be estimated with reasonable certainty to be economically recoverable from known reservoirs and under defined economic conditions, operating methods, and government regulations.

Undeveloped Reserves: are quantities of hydrocarbons which are expected to be recovered through future drilling.

Unproved Reserves: are reserves based on geological and engineering data similar to that used in estimating the proved reserves, but technical, contractual, or regulatory uncertainties preclude such reserves being classified as proven. Unproved reserves are sub-classified as probable and possible reserves:

Probable Reserves: those additional reserves which are less likely to be recovered than proved reserves but more certain to be recovered than possible reserves.

Possible Reserves: those additional reserves which are less likely to be recoverable than probable reserves.

1P Reserves: the total of proven reserves.

2P Reserves: the total of proven and probable reserves.

3P Reserves: the total of proven, probable and possible reserves.

P10 Reserves: are possible reserves which have at least a 10% probability that the quantities recovered will be equal to or greater than the estimate.

P50 Reserves: are probable reserves which have at least a 50% probability that the quantities recovered will be equal to or greater than the estimate.

P90 Reserves: are proven reserves which have at least a 90% probability that the quantities recovered will be equal to or greater than the estimate.

In the following table I have clarified the relationship between the different reserves:

Oil and Gas Reserves Classification 

Increasing Quality of Reserves ↑

 Proved Reserves (P90)    P1
 Undeveloped Reserves  
 Unproved Reserves  Probable Reserves (P50)  P2
   Possible Reserves (P10)  P3

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