Organic Reserve Replacement

AAA

DEFINITION of 'Organic Reserve Replacement'

Oil reserves that an oil company acquires by exploration and production rather than by purchasing proved reserves. Investors looking at the financial strength of oil exploration and production companies should consider the company's organic replacement when evaluating its reserve-replacement ratio. A reserve-replacement ratio achieved organically is considered much better than a reserve-replacement ratio achieved through purchasing.

INVESTOPEDIA EXPLAINS 'Organic Reserve Replacement'

The reserve-replacement ratio measures the amount of proved reserves added to a company's reserve base during the year relative to the amount of oil and gas produced. A company's reserve-replacement ratio should be at least 100% for the company to stay in business long-term; otherwise, it will eventually run out of oil. The reserve-replacement ratio is just one method investors should use to get an accurate picture of how well an oil company is performing.

RELATED TERMS
  1. Reserve-Replacement Ratio

    A metric used by investors to judge the operating performance ...
  2. Enhanced Oil Recovery - EOR

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

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

    A ratio used in the oil services industry that measures the amount ...
  5. Energy Sector

    A category of stocks that relate to producing or supplying energy. ...
  6. Peak Oil

    A hypothetical date referring to the world's peak crude oil production, ...
Related Articles
  1. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  2. 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.
  3. Options & Futures

    A Guide To Investing In Oil Markets

    Find out how to take advantage of this market without having to open a futures account.
  4. 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.
  5. Options & Futures

    Peak Oil: Problems And Possibilities

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

    Unearth Profits In Oil Exploration And Production

    Drill down into financial statements to tap into the right companies and let returns flow.
  7. Options & Futures

    Forecast Of Oil Production by Country in 2015

    Supply is still ahead of demand and looks to stay ahead for most of 2015. Until production noticeably weakens, that situation is unlikely to change.
  8. Economics

    Why The Russian Economy Rises and Falls With Oil

    The Russian economy depends on profitable oil production to pay for the cost of government, prop up the ruble, and provide most of it exports revenue.
  9. Economics

    How Oil Prices Impact the U.S. Economy

    Now that the United States has increased oil production through shale oil and fracking, low oil prices can harm the U.S. oil industry and its workers.
  10. Mutual Funds & ETFs

    Take Advantage of Cheap Oil, Invest in these ETFs

    With crude oil prices at record lows, investors should consider oil ETFs over oil company stocks as ETFs more closely mirror the price of oil

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center