A practical probabilistic method is presented to administer the evaluation of proved undeveloped (PUD) oil and gas reserves in resource plays. In 2009, the Security and Exchange Commission (SEC) adopted revisions to the oil and gas reporting rules which allowed for the opportunity to use probabilistic methods in the evaluation and disclosure of PUD locations that are more than one spacing unit away from existing production. The revisions to the "Modernized SEC Rules" created a need for improved methods to evaluate and disclose probabilistic reserves. The objective of this paper is to present a new and practical probabilistic method for PUD reserve reporting that addresses the SEC requirements. The paper addresses the issues of proved reserve volumes per PUD location, proved well spacing, and "sweet-spots".

The useful method may be applicable to a broad range of subjects, such as professional expertise, individual ownership positions, and geologic play situations. The figures and principle steps of the method are presented using the Fayetteville Shale as an example. The method was developed specifically to comply with the Modernized Rules, to be consistent with statistical principles, and to accommodate ownership situations while maintaining an expectation of being practical to use.

The first paper (Dobson 2011) in this series of three introduced a new method of describing the proved area in a resource play. The third paper will present a practical justification for this probabilistic approach. In this paper, historical production statistics are used to evaluate the method's ability to comply with reasonable certainty in a forecast at specific PUD locations.

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