Proven Reserves

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DEFINITION of 'Proven Reserves'

After an oil exploration firm conducts a seismic survey on a piece of land, it obtains the proven and probable reserves in that area. Proven reserves are those which have an over 90% chance of being present. For example if a oil company believes that there is good chance of a successful drilling operation, they would classify those reserves as "proven."

BREAKING DOWN 'Proven Reserves'

If a reserve is considered to be proven, this does not guarantee a successful operation. After the total reserves of a piece of land are determined, the oil company makes a decision whether or not to pursue drilling. The initial seismic test is considered a sunk cost.


Total Reserves = Proven + Probable (unproven)


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

    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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    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
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    Domestic energy investors should track the reserve inventory of crude oil for the United States, which is released in a weekly ... Read Full Answer >>

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