Occidental Petroleum 2014 Annual Report Download - page 135

Occidental Petroleum Corporation
January 30, 2015
Page 3
Applicable Petroleum Reserves Definitions
The determination of the proved reserves classifications as discussed herein are based on the definitions as set forth in the
Securities and Exchange Commission’s Regulations Part 210.4-10(a) released January 14, 2009 in the Federal Register, Volume
74, pages 2158 through 2197.
Reserves and Uncertainty
The SEC defines reserves as the “estimated remaining quantities of oil and gas and related substances anticipated to be
economically producible, as of a given date, by application of development projects to known accumulations.” All reserve estimates
involve an assessment of the uncertainty relating to the likelihood that the actual remaining quantities recovered will be greater or
less than the estimated quantities determined as of the date the estimate is made. The uncertainty depends chiefly on the amount
of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative
degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved.
Unproved reserves are less certain to be recovered than proved reserves and may be further sub-classified as probable and
possible reserves to denote progressively increasing uncertainty as to their recoverability.
In many cases, the analysis of the available geoscience and engineering data and the subsequent interpretation of this data
may indicate a range of possible outcomes in an estimate, irrespective of the method selected by the evaluator. When a range in
the quantity of reserves is identified, the evaluator must determine the uncertainty associated with the incremental quantities of the
reserves. If the reserves quantities are estimated using the deterministic incremental approach, the uncertainty for each discrete
incremental quantity of the reserves is addressed by the reserves category assigned by the evaluator. Therefore, it is the
categorization of reserve quantities as proved, probable or possible that addresses the inherent uncertainty in the estimated
quantities reported. For proved reserves, uncertainty is defined by the SEC as reasonable certainty that the estimates of the
quantities actually recovered are “much more likely to be achieved than not.” The SEC defines probable reserves as “those
additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as
likely as not to be recovered.” The SEC defines possible reserves as “those additional reserves that are less certain to be
recovered than probable reserves.” All quantities of reserves within the same reserves category must meet the SEC definitions as
noted above.
The reserves for the properties reviewed by us were estimated by Occidental using deterministic methods and presented
as incremental quantities. Under the deterministic incremental approach, discrete quantities of reserves are estimated and
assigned separately as proved, probable or possible based on their individual level of uncertainty. At Occidental’s request, this
reserves process review addresses only the proved reserves attributable to the properties reviewed herein.
Reserves estimates will generally be revised only as additional geologic or engineering data become available or as
economic conditions change. For proved reserves, the SEC states that “as changes due to increased availability of geoscience
(geological, geophysical, and geochemical), engineering, and economic data are made to the estimated ultimate recovery (EUR)
with time, reasonably certain EUR is much more likely to increase or remain constant than to decrease.” Moreover, estimates of
proved, probable and possible reserves quantities and their associated reserves categories may be revised due to other factors
such as the results of future operations, effects of regulation by governmental agencies or geopolitical or economic risks.
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