Hess 2014 Annual Report Download - page 133

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DeGolyer and MacNaughton
(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but
not limited to, fluid injection) are included in the proved classification when:
(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the
reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence
using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program
was based; and, (B) The project has been approved for development by all necessary parties and entities, including
governmental entities.
(v) Existing economic and operating conditions include prices and costs at which economic producibility from a
reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of
the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for
each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon
future conditions.
Developed oil and gas reserves – Developed oil and gas reserves are reserves of any category that can be expected to be
recovered:
(i) Through existing wells with existing equipment and operating methods or in which the cost of the required
equipment is relatively minor compared to the cost of a new well; and
(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the
extraction is by means not involving a well.
Undeveloped oil and gas reserves – Undeveloped oil and gas reserves are reserves of any category that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for
recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are
reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable
certainty of economic producibility at greater distances.
(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted
indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time.
(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an
application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been
proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in Rule 4-10(a)(2) of
Regulation S-X, or by other evidence using reliable technology establishing reasonable certainty.
Primary Economic Assumptions
The following economic assumptions were used for estimating existing and future prices and costs:
Oil and Condensate Prices
Hess has represented that the oil and condensate prices were based on a 12-month average price (reference price),
calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month
period prior to the end of the reporting period, unless prices are defined by contractual arrangements. The 12-month
average reference prices used were $94.42 per barrel for West Texas Intermediate and $101.35 per barrel for Brent. Hess
supplied appropriate differentials by field to the relevant reference prices and the prices were held constant thereafter. The
volume weighted average price for the fields evaluated was $93.80 per barrel.