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. Stock Analysis

    What Are Kinder Morgan’s Plans For Growth In 2016?

    One thing investors likely love about Kinder Morgan is its robust backlog of future projects, like growing its generous dividend by 10% per year.
  8. Stock Analysis

    What Has Been Delta Airlines Strategy To Soar?

    Airline stocks have soared over the past several years, and Delta Air Lines has been one of the leading airlines to reap the benefits. 
  9. Stock Analysis

    What Is Sempra Energy’s Future With LNG?

    Sempra Energy sees a very bright future for its LNG business, especially after its recently filed for approval to expand its Cameron LNG facility in LA.
  10. Stock Analysis

    Why Is Enterprise Products Partners So Excited?

    Enterprise Products Partners has historically gone on the offensive to acquire weaker rivals in a tough spot when the commodity market turns down.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center