Decline Curve

AAA

DEFINITION of 'Decline Curve'

A method for estimating reserves and predicting production in oil reservoirs and oil fields. The decline curve shows how oil and gas production rates decrease over time.

INVESTOPEDIA EXPLAINS 'Decline Curve'

Most decline curves are based on exponential, hyperbolic or harmonic Arps equations, but tend to have shortcomings such as underestimating reserves, underestimating production rates, or overestimating reservoir performance. The Arps equations were developed in the mid-1900s but are still used today despite their limitations.

RELATED TERMS
  1. Enhanced Oil Recovery - EOR

    Enhanced oil recovery (EOR) is the process of obtaining stranded ...
  2. Estimated Ultimate Recovery - EUR

    A production method commonly used in the oil and gas industry. ...
  3. Rig Utilization Rate

    A ratio used in the oil services industry that measures the amount ...
  4. North Sea Brent Crude

    A type of oil that is sourced from the North Sea. This type of ...
  5. Sweet Crude

    A type of oil that meets certain content requirements, including ...
  6. Barrels Per Day - B/D

    A measure of oil output, represented by the number of barrels ...
RELATED FAQS
  1. How much of the United States' energy is produced within the country?

    In 2014, the United States produced 87.1 quadrillion BTU, while it consumed 98.4 quadrillion BTU. This continues a trend ... Read Full Answer >>
  2. Which countries are able to produce oil and gas the cheapest?

    It is difficult to estimate and compare oil extraction costs across the globe because of uneven regulation and subsidies ... Read Full Answer >>
  3. What metrics can be used to evaluate companies in the oil and gas sector?

    Oil and gas sector analysts use a variety of metrics to evaluate and compare individual companies’ performance. There are ... Read Full Answer >>
  4. Which segment of the oil and gas sector is most vulnerable if oil prices drop?

    The segment of the oil and gas sector that is most vulnerable if oil prices drop is small-cap explorers and producers. These ... Read Full Answer >>
  5. Why do investors consider the rig utilization rates when investing in oil and gas?

    A rig utilization rate measures a company’s rigs that are operating in proportion to the company's total available rigs. ... Read Full Answer >>
  6. Why do investors look at dayrates when evaluating an oil company's contracts?

    Investors look at day rates when evaluating an oil company's contracts because they have a large impact in determining earnings. ... Read Full Answer >>
Related Articles
  1. Economics

    Peak Oil: What To Do When The Wells Run Dry

    Find out how to invest and protect your investments in this slippery sector.
  2. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  3. Active Trading

    Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.
  4. Options & Futures

    Fueling Futures In The Energy Market

    The energy market influences every aspect of our lives, and these four options are its driving force.
  5. Fundamental Analysis

    Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.
  6. Options & Futures

    Peak Oil: Problems And Possibilities

    Learn a little more about the "non" part of this nonrenewable resource.
  7. Active Trading

    Unearth Profits In Oil Exploration And Production

    Drill down into financial statements to tap into the right companies and let returns flow.
  8. Investing

    Will Shale Oil Companies Go Bankrupt?

    An overview of shale oil companies and the threats they face in the aftermath of the decline in crude oil prices.
  9. Economics

    Gaining Market Influence-- The Case of US Shale

    A convergence of sustained bank financing, falling production costs and rising oil prices might position the US shale industry for a greater market role.
  10. Charts & Patterns

    Should Investors Get Into Oil Now?

    Oil has enjoyed a steady climb after a violent plunge. Where is it going next, and how can investors profit?

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center