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
  1. How does an oil and gas company measure and state their reserves?

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  2. What is the difference between proven and probable reserves in the oil and gas sector?

    Learn how those in the oil and gas sector classify oil reserves and the specific differences between proven and probable ... Read Answer >>
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