![]() Arps’ use of the term valuation seemed to have a relatively narrow scope. Arps wrote the valuation chapter, and reference to his name in this chapter is generally the same as a reference to the chapter he authored in that handbook. The use of the word "valuation" in the title of this chapter is a carryover from the first handbook. Securities and Exchange Commission (SEC). For example, a reserves definition that might be used for property acquisition might not meet the reporting requirements of the U.S. One must be cautious, however, and be mindful of the applicable reserves definition. If the evaluation, inclusive of the reserves estimates and production schedules, is prepared in a manner anticipating an FMV estimate as the goal, the objective evaluator will be inclined to use appropriate judgment. Like the estimation of reserves, the preparation of an economic evaluation has subjective elements. While an FMV estimate is often not the main reason an economic evaluation is prepared, it is useful to keep in mind that it may be used for such a purpose. Appendix A, which describes common types of oil and gas property interests, is from the SPEE FMV document. Another common contractual structure is the production-sharing arrangement. A common arrangement for such contracts is the oil and gas lease. These agreements often include specific commitment obligations such as the drilling of wells. ![]() Reserves ownership is usually derived from contractual agreements that specify the obligations of the parties to those agreements for the payment of costs and the sharing of revenues. To value reserves, the nature of the ownership must be considered. In this chapter, that document is referred to as the SPEE FMV document. This chapter often refers to a document titled Perspectives on the Fair Market Value of Oil and Gas Interests published by the Society of Petroleum Evaluation Engineers (SPEE) in the spring of 2002. This chapter describes the use of a reserves estimate to prepare an economic evaluation and perhaps then place a value on the reserves.
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