What Is Estimated Ultimate Recovery?

Estimated ultimate recovery (EUR) is a production term commonly used in the oil and gas industry. Estimated ult🥀imate recovery is an approximation of the quantity 🍸of oil or gas that is potentially recoverable or has already been recovered from a reserve or well.

EUR is similar in concept to recoverable reserves.

Understanding Estimated Ultimate Recovery

Estimated ultimate recovery can be calculated using many differing methods and units depending on the project or study being conducted. In the oil and gas industry, it is of the utmost importance that drilling projects🅠 meet an acceptable EUR threshold for a project to be considered viable and profitable.

A more precise definition of EUR is "discovered oil reserves" and there are three categories, each based on the degree of likelihood that the oil can be recovered using current technology.

1. 澳洲幸运5官方开奖结果体彩网:Proven Reserves — There is a greater than 90% chance that the oil will be recovered.
2. 澳洲幸运5官方开奖结果体彩网:Probable Reserves — The chance of actually getting the oil out is greater than 50%.
3. 澳洲幸运5官方开奖结果体彩网:Possible Reserves — The likelihood of recovering the oil is significant, but less than 50%.

Keep in mind that part of an oil field's probable and possible reserves are converted into proven reserves over time. These reserves can be re-categorized for a number of reasons ranging from improvements in oil recovery methods and techniques to changing oil prices. For example, as oil prices rise, the quantity of proven reserves also rises because the 澳洲幸运5官方开奖结果体彩网:breakeven price of recovery can be met. Reserves that were too expensive to produce at lower oil prices become viable as oil prices🍌 rise. This makes it possible to reclassify these more costly reserves as proven. The opposite happens as oil prices fall. If oil reserves become too expensive to recover at current mar♉ket prices, the probability of them being produced also falls. This results in reserves being reclassified from proven back to probable or even possible.

EUR's Use to Value Oil Reserves

Without an estimated ultimate recovery, oil companies would not be able to make rational investment decisions. Like all projects, management needs to be able to estimate accurately the 澳洲幸运5官方开奖结果体彩网:net present value (NPV) of an oil drilling project. This valuation exercise requires several inputs, like the cost of bringing the first barrel to production, the cost of capital, the long-term price 💞of oil and the ultimate amount of oil that will be produced, or EUR. Without an EUR, it would not be possible to reach an accurate valuation of t𒈔he potential oil reserves.