Oil and gas reserves are the assets that create value for oil and gas companies. While engineers are generally aware of the importance of reserve calculations, many do not know exactly how their work impacts the financial results. Oil and gas reserves, along with the book value, determine the depletion rate which impacts the net income of the company. This paper describes the general accounting process as it relates to reserves, the depletion, depreciation, and amortization (DD&A) process under Full Cost and Successful Efforts accounting methods, and its impact on net income.

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