Booking proved undeveloped petroleum reserves has become a give-and-take exercise under new U.S. SEC regulations. Oil and gas companies are reporting both upward and downward year-end PUD revisions in the same properties.

-- Based on a new “reasonable certainty” standard, companies are reporting PUD locations at distances greater than one legal offset from economically producing wells in their year-end 2009 results. That has boosted PUD reserves, especially from shale-gas locations.

-- Reporting companies took PUD wells off the books if they were scheduled to be drilled more than five years from initial PUD assignment. Few exceptions were made, but more were expected in 10-Ks to be filed on or before March 15.

Cabot Oil & Gas Co. reports it made an exception for 16 Bcfe of PUD reserves delayed by “external factors.” However, it removed 120 Bcfe of PUDs that fell outside of the five-year development window by reclassifying them to probable. That was consistent with a reallocation of its capital program to develop assets in Pennsylvania and East Texas.

Across the industry, proved reserves, including PUDs, also dropped because average commodity prices for the year were lower than year-end prices. The SEC changed the rules from a one-day year-end price to an annual average to lessen the effects of volatility.

Some companies detailed the extent to which the five-year limitation decreased PUDs and multiple offsets increased them. For Bill Barrett Corp., the net effect was to boost PUDs. The company said it included additional offsetting locations, where warranted, in the Williams Fork formation in Gibson Gulch, a basin-centered, “continuous” accumulation of gas. That increased PUDs for the field by 64 Bcfe. The five-year limitation “had a nominal impact of reducing reserves by 7 Bcfe,” the company reported.

For The Williams Cos. Inc., the net effect was a “wash.” Williams reclassified 496 Bcfe of reserves from PUD to probable because of the five-year limit, while adding 454 Bcfe of PUD reserves through additional offsets.

Companies also assigned PUD locations more than one direct offset from a producer not only in shale, but also in conventional accumulations. Barrett’s Williams Fork produces from sandstone reservoirs.

--Mike Wysatta

About the Author: Mike Wysatta is business-development manager for Ryder Scott Petroleum Consultants based in Houston. He can be reached at 713-651-9191 and mike_wysatta@ryderscott.com.

Click for the PDF of Wysatta’s full report on this, including how the new SEC reserve rules were incorporated in year-end results for Newfield Exploration Co., Pioneer Natural Resources Co., EQT Corp., Petrohawk Energy Corp., Noble Energy Inc., Range Resources Corp., Bill Barrett Corp., Ultra Petroleum Corp., OAO Novatek, Rosneft, Petrobras and Chesapeake Energy Corp. and other reserve-analysis articles in the March-May 2010 issue of Ryder Scott’s Reservoir Solutions newsletter: reservoirsolutionsryderscottmarch2010.