The issue of proven reserves took on a new meaning a year ago when Shell Oil stunned the oil industry and the financial markets with a 20% write-down in its reported proved reserves. With the benefit of hind sight, this was just the beginning of an even great write down. An additional 5% write down happened six weeks later. Towards year-end, another 900 million barrels were reclassified with about half the remaining reserves still being analyzed on a well by well basis.

This event raised for the first time in years the whole reserve classification process. Sarbanes Oxley reporting requirements tightened the intensity of the subject. By mid year, some observers were arguing that the old definitions of what constituted Proven reserves by the SEC and the SPE were outmoded. Others argued the opposite and suggested that there might be an industry wide issue at play as too many companies added far more proven reserve additions each year than they produced yet failed to very increase daily production in line with their growth in proven reserves.

Mr Simmons'' presentation will examine the issues at play and raise some key questions on the whole process of determining reserve status of discovered hydrocarbon, including whether the need for intense appraisal well drilling and coring should have increased instead of dwindling as 3-D seismic and reservoir simulation models began replacing this method of analyzing the amount of OOIP and EUR reserves any reservoir holds. Matt will also discuss the issue of data reform to better examine how many other key producers might have some of the same reserve reclassification issues that Shell encountered.