Why Reserve Engineering Capabilities Boost Outsourcing Solutions

By Karthik Revana 

While U.S. oil production and, with it prices, are on the rise (at least year-over-year), oil and gas companies continue to maintain financial and operational discipline they acquired, albeit unwillingly, from a four-year price trough that inevitably sapped earnings, restricted capital expenditures and significantly reduced headcount. One of the ways oil and gas companies look to improve efficiency in the daily business of transactional and financial reporting is to tap oil and gas professionals that offer back-office outsourcing solutions. 

Oil and gas outsourcing is a smart solution for many oil and gas companies for several reasons. With a skilled, right-sized staff using high-quality technology, oil and gas consulting back-office outsourcing can significantly lower costs while maintaining business as usual. In a time when mergers and restructurings are increasingly frequent, oil and gas outsourcing remains a convenient solution that provides reliability and continuity. 

Adding Value: Reserve Engineering & Geosciences

Reserve engineering and geoscience capabilities can bring added value to back-office outsourcing solutions. The discovery and preparation for the production of oil and gas reserves is the primary objective of exploration and development activities. In addition, reserve information is critical to an oil and gas producer’s financial statements. 

Reserves is one metric by which the value of an oil and gas company is measured by investors, financial analysts, government, peer companies, industry groups and banks. Industry experience clearly demonstrates the perils of inadequate adherence to SEC reserves regulations. Accurate reserves and resources estimates by an independent accredited third-party evaluator is important for guiding decision-making processes in the future, and for proper allocation of capital and personnel to viable projects. 

The type and extent of the data required can vary in accordance with the methods employed to estimate reserves and other reserves information. In this regard, information must be available with respect to each property or group of properties as to ownership and fiscal terms, marketing arrangements (including product prices), operating interests, and expense interests and revenue interests and future changes in any of such interests that, based on current circumstances, are expected to occur. 

Additionally, if future net revenue from reserves, or the present value of such future net revenue, is to be estimated, the database should include, with respect to each property or group of properties, estimated future expenditures for capital required in field development, capital for continued production maintenance, including, but not limited to, workovers and compression costs, operating costs, taxes, fees, transportation charges and ultimate dismantlement costs, if appropriate. 

Acceptable methods for estimating reserves include:

  • The volumetric method;
  • Evaluation of the performance history;
  • Development of a mathematical model through consideration of material balance and computer simulation techniques; and
  • Analogy to other reservoirs if geographic location, formation characteristics or similar factors render such analogy appropriate.

In estimating reserves, Reserves Estimators should utilize the particular methods, and, if possible, combinations of a number of methods which, in their professional judgment, are most appropriate given: the geographic location; reservoir rock and fluid characteristics and nature of the property or group of properties with respect to which reserves are being estimated; the amount and quality of available data; and the significance of such property or group of properties in relation to the oil and gas properties with respect to which reserves are being estimated. 

For all methodologies, the current reservoir conditions, such as pressures and fluid contacts, must be given consideration, as these may vary with time over the producing life of the property. Any or all of the methods identified above may need adaptation to conform to the reserves definitions that are applicable to the purpose of the estimate. In no event should the result of two or more methodologies be averaged to provide an estimate of reserves. 

How We Can Help

Ralph E. Davis Associates has provided consulting services to the energy industry since its founding in 1924, enjoying the highest level of confidence with its clients. Its professionals are capable of performing engineering and geological studies, evaluations of oil and gas properties, economic determinations and financial analyses. 

Opportune LLP currently provides back-office outsourcing services for more than 200 public and private companies across the world. Opportune's outsourcing team offers expertise in transaction reporting, land administration and reporting, joint interest billing, accounts payable/receivable, production allocation and reporting and software system administration. 

Clients rely on Opportune’s deep oil and gas operational expertise and knowledge, so they are able to focus on other internal business functions. If you need a team of experienced energy consultants to provide comprehensive solutions to your oil and gas transactional process and reporting challenges, contact Opportune’s professionals today.

About the Author:

Karthik Revana is a petroleum engineer with Ralph E. Davis Associates. Karthik has over 12 years of experience in the energy space where he has worked on acquisition evaluation and operation of assets in several domestic and international basins. In addition, Karthik has served as reservoir engineer for several conventional fields under primary and secondary recovery and has managed drilling and completions in unconventional reservoirs. He has experience with various oilfield economic evaluation software for acquisition evaluations, reserves and project economics. Karthik is a registered professional engineer in the state of Texas and holds an M.S. from the University of Texas in Petroleum Engineering and a M.E. in Systems Engineering from Texas A&M University. He holds a B.E degree in Chemical Engineering from V.T.U in India where he graduated First Class with Distinction.

Karthik Revana

Petroleum EngineerRalph E. Davis Associates

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