Valuation of Gas Reserves
- Ralph E. Davis (Consultant) | J. Milton Wege (Consultant)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- September 1956
- Document Type
- Journal Paper
- 18 - 21
- 1956. Original copyright American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc. Copyright has expired.
- 4.6 Natural Gas
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Much has been said and written on this subject, and of its kindred subject, the valuation of oil reserves. Little would be gained by merely quoting again that which has been said and written. Our object in this presentation is to bring out ideas and maybe methods that have not been heretofore presented, or at least have not been widely circulated in the literature of this subject.
The fundamentals of this art or science or business of appraising gas properties have been presented by many writers. To avoid the necessity of reviewing and restating the basic factors and methods frequently employed, we refer you to a fairly recent discussion by the senior author of this paper in collaboration with Eugene A. Stephenson as presented in a paper entitled "The Valuation of Natural Gas Property"." The fundamentals were then expressed as clearly as we can do it today.
In this paper we presume the understanding of the points made in the paper referred to, and address this paper to a discussion of the appraisal of "gas reserves" as distinguished from "natural gas property." Hence, we assume a "proved reserve" available for sale in the conditions that exist today - as to financial, economic and political influences.
Generally speaking, properties such as gas properties are worth more money - i.e., they will sell for more money - when the financial conditions of the country and of the industry are good, when it is easier to finance. Also it is true that such a property is worth more money when the economic conditions are good, such as a continuing increase of the demand for the product and no serious threat of a cheaper competitive fuel; and also such a property is worth more money if the political atmosphere is favorable. The fixing of price, or even the threat of the fixing of price, by government, lessens the desirability of the property whose product is regulated. These factors should, we believe, be taken into consideration by the appraiser.
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