Hess 2014 Annual Report Download - page 132

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properties, and the production histories. When applicable, material balance and other engineering methods were used to estimate
recovery factors. An analysis of reservoir performance, including production rate, reservoir pressure, and gas-oil ratio behavior, was
used in the estimation of reserves.
For depletion-type reservoirs or those whose performance disclosed a reliable decline in producing-rate trends or other
diagnostic characteristics, reserves were estimated by the application of appropriate decline curves or other performance relationships.
In the analyses of production-decline curves, reserves were estimated only to the limits of economic production or to the limit of the
production licenses as appropriate.
Petroleum reserves estimated by Hess and by us are classified as proved and are judged to be economically producible in
future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory
practices using conventional production methods and equipment. Reserves were estimated only to the limit of economic production
rates under existing economic and operating conditions using prices and costs consistent with the effective date of this report,
including consideration of changes in existing prices provided only by contractual arrangements but not including escalations based
upon future conditions.
Gas volumes herein are expressed as marketable gas at the legal pressure and temperature base of the state or area in which
the property is located. Marketable gas is defined as the total gas produced from the reservoir after reduction for shrinkage resulting
from field separation; processing, including removal of nonhydrocarbon gas to meet pipeline specifications; and flare and other losses
but not from fuel usage. Fuel gas is included as reserves. Condensate reserves estimated herein are those to be recovered by
conventional lease separation. NGL reserves are those attributed to the leasehold interests according to processing agreements.
Definition of Reserves
Petroleum reserves estimated by Hess included in this report are classified as proved. Only proved reserves have been
evaluated for this report. Reserves classifications used by Hess in this report are in accordance with the reserves definitions of Rules
4–10(a) (1)–(32) of Regulation S–X of the SEC. Reserves are judged to be economically producible in future years from known
reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using
conventional production methods and equipment. In the analyses of production-decline curves, reserves were estimated only to the
limit of economic rates of production under existing economic and operating conditions using prices and costs consistent with the
effective date of this report, including consideration of changes in existing prices provided only by contractual arrangements but not
including escalations based upon future conditions. The petroleum reserves are classified as follows:
Proved oil and gas reserves – Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date
forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to
the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain,
regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must
have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid
contacts, if any; and, (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be
continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering
data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known
hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable
technology establishes a lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential
exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir
only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable
certainty.