Amplitude Energy Limited · ASX:AEL
Amplitude Energy — Cooper Energy — Good Oil Conference 2009
35 slides from Amplitude Energy's conference presentation, Sep 12, 2009
Slide 1: Introduction to the Good Oil Conference presentation
Ladies and gentlemen, thank you for attending my presentation. Firstly I’d like to thank the organisers of the Good Oil Conference for allowing me a valuable slot in their program to present my views on the classification of recoverable hydrocarbons. I am a little bit nervous because this topic is a
Slide 2: Speaker background and scope
As a petroleum‐reservoir engineer I find the estimating, classification and reporting of recoverable hydrocarbons especially interesting and probably one area where I have spent a lot of time during my professional career. Today I will discuss only the classification and reporting aspects – I will n
Slide 3: Presentation outline
To clarify classification and reporting I’ll run through some fundamentals, the standards that exist today, our obligations in Australia, The Society of Petroleum Engineers PRMS standard, some challenges that we face using this standard and then summarise the presentation. For those so inclined I ha
Slide 4: SS
SS
Slide 5: Recoverable hydrocarbons and production forecasts
One thing that Petroleum‐Reservoirs do on a routine basis, if not every day, is make forecasts of production. These forecasts are then used in economic models to calculate value and, at the point where cash flow goes negative, the sum of production from now until that date is what we expect to recov
Slide 6: Ultimate recovery and recoverable hydrocarbons over field life
[Run through chart terminology] Ultimate Recovery typically makes up 20‐60% of the hydrocarbons that were originally in place in the ground. A large percentage of hydrocarbons cannot be physically recovered from the pore spaces in the underground reservoir. We also experience a minor loss due to los
Slide 7: Field maturity process
This chart is intended to show the how an oil or gas field goes through a number of stages before it is brought onto production. Initially it starts of as a gleam in the eye of a geologist. It then is matured to a prospect, which is then drilled. If we are lucky and a discovery is made made, it then
Slide 8: Uncertainty at each maturity stage
At each of the maturity stages our oil or gas field has uncertainty. Prior to drilling the field the recoverable hydrocarbon estimates have a big uncertainty and this uncertainty generally reduces as data is collected. However, I have seen cases where the uncertainty band actually got bigger so take
Slide 9: P90, P50 and P10 terms
P90, P50 and P10 are much misused and misunderstood terms. [Go through the slide]. So now we have defined recoverable hydrocarbons in two axis – maturity and uncertainty. 9
Slide 10: Maturity and uncertainty matrix
If we combine maturity and uncertainty into a simple matrix we end up with this. Maturity goes upwards as a oil or gas field matures. The uncertainty at each level spans across in the horizontal direction. [Talk through the categories]. Note that recoverable hydrocarbons can only move up through the
Slide 11: Reporting standards across the world
As would be expected there are quite a few standards across the world and here are some examples. The standards vary in complexity with some easy to use, such as the UK or Canada, or some very complex, such as the UN standard, which is extremely complex. There is no best standard. So what do you use
Slide 12: Reporting obligations in Australia
Here are your obligations in Australia. In general they are very limited when it comes to the reporting of oil and gas. [Talk through slide]. Australia does not lock companies into a single standard, which is a very pragmatic solution. One of the more common codes that is believed to be understood i
Slide 13: SPE PRMS maturity and uncertainty matrix
Like the simple matrix, it is a maturity and uncertainty matrix. Maturity is up the left and uncertainty across the top. You will note in maturity that there are ten maturity categories. These categories mature from undiscovered recoverable hydrocarbons through a discovery and then up to production.
Slide 14: Reserves classification recap
Let me reiterate: [As per slide] So everybody is now clear on reserves classification. Let us take a look at some of the common issues… 14
Slide 15: Common confusions
Now we are all nodding wisely, let’s discuss some of the more common confusions… 15
Slide 16: Conflicts from sub-categories and probability estimates
As an example of some of the complexity of the definitions, have a look at some of the conflicts that could occur if we do not report sub‐categories or we do not use probability estimates: [As per slide] [Proved Reserves Quarter] For those of you who haven haven’tt worked it out yet – if you want to
Slide 17: Can a company mature 3P to 2P to 1P?
Cana company mature 3P to 2P to 1P? + Not if you are using probabilistic methodology SPE PRMS. + You can mature recoverable hydrocarbons up through the categories and the uncertainty should reduce as a result but it is impossible to move recoverable hydrocarbons from 3P to 2P to 1P. Evolution of man
Slide 18: "My in-place reserves are..."
“My in-place reserves are...” You either have in-place estimates or recoverable estimates In-place estimates cannot be referred to as RESERVES Saying “in-place reserves” when you mean “in-place estimates” reveals you as a non-qualified person However, reporting in-place estimates is acceptable: Reco
Slide 19: "Our Mean estimates are..."
“Our Mean estimates are...” Companies may report MEAN estimates because it is usually the big number (equal to or bigger than P50 but smaller than P10 - but the confidence level of the MEAN estimate is usually unreported) Companies should use P50 or P90-P50-P10 or P90-P50-P10-Mean Let investors make
Slide 20: What do investors need to ask?
What do investors need to ask? * What is the standard that the company is using. + Ifa company states SPE “1P”, “2P” or “3P” ask what is the developed producing, the developed non-producing and the undeveloped (approved for development and justified for development split) split. + Ifa company states
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Slide 22: Summary
Summary + Reserve classification categories and terminology only pertain to the standard that is being used. + Acompany should chose a standard that best suits their circumstances but may be driven by law to use another standard (i.e. SEC or NI-101) * Companies must report clearly the maturity categ
Slide 23: Thank you and questions
Ladies and gentlemen, thank you very much for your time. I’d be happy to answer any question now or while I’m wandering round the exhibition area. Thank you. 23
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Slide 25: Chance of Success Versus Estimate Uncertainty?
Chance of Success Versus Estimate Uncertainty? Chance of success 80% Chance of success 20% Uncertainty in discovered recoverable estimate P90-P50-P10 “Exploration success gets you onto the uncertainty range.” 25 25
Slide 26: Proposed Cleaned Up Classification Framework
Proposed Cleaned Up Classification Framework Production (Produced) Producing On Production De 3 [seers o 4 eed Approved for development 8 Justified for development a Development Pending eerie Development unciariied or on hold Development unviable Undiscovered 26
Slide 27: Maturity levels within reserve categories
Now we understand that the major categories of Reserves, Contingent Resources and Prospective Resources each have a number of maturity levels for each category. As an example of some of the complexity of the definitions, let us look now at the middle company example: [As per slide] The other example
Slide 28: How do we handle Deterministic Evaluations in SPE?
How do we handle Deterministic Evaluations in SPE? “Deterministic” unfortunately has two meanings: 1. Manual estimate of low-medium-high (on a non-probabilistic basis) 2. Single “best” estimate + Manual estimate of low-medium-high has a similar output to probabilistic methods, even though confidence
Slide 29: Why is there Uncertainty in Hydrocarbon Estimates?
Why is there Uncertainty in Hydrocarbon Estimates? + Awell in a reservoir is typically only 8 4” wide. From this we take a limited amount of measurements and then try to infer what a field of say 10 km x 5 km contains. * This uncertainty in the parameter measurements causes the uncertainty in the ou
Slide 30: Normal Distribution f(x,0,1)
Normal Distribution f(x,0,1) 0.45 T f(x) ~ 0.4 0.44 TAIN - / | \ 0.3 / \ 0.25 | tm) ~0.18 / \ 0.2 § -4 -3 2 -71 #0 1 2 -1.280 Oo (P90) (PSO)
Slide 31: Upper Cumulative Distribution Q(x,0,1)
Upper Cumulative Distribution Q(x,0,1) 4 Ax) = 0.9 \ T Q(x) =0.5 1 \ N -1.280 Oo (P90) (PSO)
Slide 32: Uncertainty is Captured in Probability Distributions
Uncertainty is Captured in Probability Distributions Normal Distribution f(x,0,1) Upper Cumulative Distribution Q(x,0,1) — is | ts | Ai « - P90 = pores] | \ 0.64 cinjeos Ki pe t \ o4 P50 ad / \ J N rf Ly \ | P10 4+ 3 2 1 i) 1 2 3 4 % 4 3 1 2 3 4 5 + The frequency that an estimate occurs is called a
Slide 33: SPE PRMS definition issue
SPE PRMS definition issue + Proved, Probable and Possible are defined as the 90%, 50% and 10% CUMULATIVE PROBABILITY confidence levels. + SPE definition: “Probable Reserves...are less likely to be recovered than Proved Reserves’ — in a frequency distribution this is not true. + Ina frequency distrib
Slide 34: Coal Bed Methane Reserves and Resources
Coal Bed Methane Reserves and Resources * Using conventional oil and gas standards for CBM may not be prudent due to a number of issues. + CBM has a very different technical, risk and economics profile when compared to conventional gas. * CBM should perhaps use “drilled” and “inferred” categories as
Slide 35: Examples of what we have not covered today
Examples of what we have not covered today + How is the chance of success for an exploration, appraisal and development targets derived and how do we calculated risked recoverable hydrocarbons. + The static and dynamic methods for estimating in-place volumes. + The static and dynamic methods for est