Reserves Question, page-2

Hi Cm,

Your post dovetails with my analogy with NINJA loans on the other SEA thread.  My 2 thoughts:

1) I've seen different companies use quite different pricing in their reserve statements.  Your quote above seems very clear but there must be some wiggle room given the variation for reporting.

2) Assuming your post above is correct and they do use the average price over the prior 12 months
- they get a reprieve for the Dec 31st 2014 reserve reports
- Dec 31st 2015 could cause a disaster if the experts are right (see below).  NPV for most companies will be wiped out on everything except PDP.  And PDP will decline itself with production.  Even if lenders don't call in loans, the breach of covenants will cause a major loss of confidence.


On Thursday, the investment bank Jefferies slashed its average Brent price forecast for this year to $US50.25 a barrel from $US72.25 a barrel.

"We are again lowering our oil price forecast to reflect what will likely be an oversupplied market through at least the first half of 2015," said Jason Gammel, analyst at Jefferies. "Until the oversupply is corrected, prices will be biased to the downside."

ANZ bank also downgraded its Brent and WTI oil price forecasts, by 27 per cent, to $US50 and $US48 a barrel respectively as a result of the sharp drop in oil prices over the past six weeks.

"The mood will remain cautious for the remainder of the first half of the year, before high-cost US supply discipline starts to emerge in the third quarter," the bank said in a report.

ANZ estimated in its base scenario that there is a 60 per cent chance Brent prices will average $US40-60 a barrel in 2015. But according to the bank, if output by the Organization of the Petroleum Exporting Countries and US shale producers continues to rise, there is a 30 per cent chance prices will fall to $US35-45 a barrel this year.