PV10

AAA

DEFINITION of 'PV10'

Present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an annual discount rate of 10%. This nomenclature is most commonly used in the energy industry, and is used to estimate the present value of a company's proved oil and gas reserves.

INVESTOPEDIA EXPLAINS 'PV10'

In order to calculate PV10, an energy company's reservoir engineers develop a reserve report for every existing well and proved undeveloped well location. The reserve report takes into account each well's current production rate and forecast decline rate, and also its unique production costs and expenses to develop reserves. Future gross revenues are estimated by either using prevailing energy prices or applying an appropriate escalation rate. Non-property related and indirect expenses such as general and administrative overhead, debt service, and depletion and amortization are not considered in the computation of PV10.

RELATED TERMS
  1. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  3. Proved Reserves

    A classification used in mining sectors that refers to the amount ...
  4. Internal Rate Of Return - IRR

    The discount rate often used in capital budgeting that makes ...
  5. Value-Based Pricing

    The setting of a product or service's price, based on the benefits ...
  6. Present Value - PV

    The current worth of a future sum of money or stream of cash ...
RELATED FAQS
  1. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  2. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  3. How important are contingent liabilities in an audit?

    Contingent liabilities, when present, are very important audit items because they normally represent risks that are easily ... Read Full Answer >>
  4. How does quantifying fixed overhead volume variance show whether a company is profitable ...

    Fixed overhead volume cannot definitively prove a company is profitable, but it can be used to provide an excellent indication ... Read Full Answer >>
  5. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
  6. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Calculating The Present And Future Value Of Annuities

    At some point in your life, you may have had to make a series of fixed payments over a period of time - such as rent or car payments - or have received a series of payments over a period of time, ...
  2. Investing Basics

    DCF Valuation: The Stock Market Sanity Check

    Calculate whether the market is paying too much for a particular stock.
  3. Investing Basics

    Understanding The Time Value Of Money

    Find out why time really is money by learning to calculate present and future value.
  4. Fundamental Analysis

    Internal Rate Of Return: An Inside Look

    Use this method to choose which project or investment is right for you.
  5. Fundamental Analysis

    Top 3 Pitfalls Of Discounted Cash Flow Analysis

    The DCF method can be difficult to apply to real-life valuations. Find out where it comes up short.
  6. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  7. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  8. Economics

    Gaining Market Influence-- The Case of US Shale

    A convergence of sustained bank financing, falling production costs and rising oil prices might position the US shale industry for a greater market role.
  9. Charts & Patterns

    Should Investors Get Into Oil Now?

    Oil has enjoyed a steady climb after a violent plunge. Where is it going next, and how can investors profit?
  10. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center