Probable Reserves

DEFINITION of 'Probable Reserves'

After an oil exploration firm conducts a seismic survey of a piece of land, it obtains the proven and probable reserves in that area. Probable reserves are those which have a 50% chance of being present. For example if an oil company believes that there is descent chance of a successful drilling operation, they would classify those reserves as "probable."

BREAKING DOWN 'Probable Reserves'

If a reserve is considered probable, only 50% of the expected recovery amount is factored into the total reserve. Oil companies are often valued based on a PP (proven+probable) reserve ratio basis. Probable reserves vary from possible reserves, which only have a 10% chance of full extraction.

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RELATED FAQS
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    Oil and gas companies measure reserves using data collected from geologic and seismic surveys and with engineering studies ... Read Full Answer >>
  2. What is the difference between proven and probable reserves in the oil and gas sector?

    In the oil and gas sector, proven reserves have a reasonable certainty of being recovered, while probable reserves have a ... Read Full Answer >>
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