I don't know whether this is helpful or not, but as a former shareholder who exited before it hit the fan (on Reserves being questionable and production not fitting the drilling profile upon which reserves were estimated), the question I have is more of
"Why did Maverick list in Australia?"
US based companies have (IMO) a far stricter SEC guidelines as to Proved Reserves statements. One of my reasons for buying into MAD in the first place was the value multiple of EV/1P was very low - and thus an undervalued signal. But then I was comparing to many US based companies that had a stricter convention. Just one data point to consider.
In the US, the SEC guidelines have this Q&A
Question 131.05
Question: Would a company's decision to slowly develop a field in order to extend its economic life justify recognizing proved undeveloped reserves in the field beyond five years?
Answer: No. The company should not recognize undeveloped areas as proved undeveloped reserves if it does not anticipate initiating development in those areas within five years. [Oct. 26, 2009]
Question 131.06
Question: Rule 4-10(a)(31)(ii) states that "ndrilled 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…." (emphasis added). In comparison, the Petroleum Reserves Management System of the Society of Petroleum Engineers and World Petroleum Council states that "[a] reasonable time frame for the initiation of development depends on the specific circumstances …" (emphasis added). Is there a difference between the terms "scheduled to be drilled" and "initiation of development"?
Answer: No. [Oct. 26, 2009]
Question 154.03
Question: If an issuer engages a third party to prepare or audit its reserve estimates, or to conduct a process review, of a limited amount of its reserves, does it need to file the third party's report under Item 1202(a)(8) of Regulation S-K?
Answer: If the issuer discloses in its filing that it engaged a third party to prepare or audit its reserve estimates, or to conduct a process review, of a limited amount of its reserves, then the issuer must file the third party's report. [Oct. 26, 2009]
Ryder Scott is a well known and regarded 3rd party reserves engineering group. They note the following SEC comments on the "Five-year Rule":
* PUDs converted at "mathematically impossible" rates
* How to convert PUDs to proved developed in 5 years–Provide volumes/percentages of PUDs converted in prior years
* Explain why PUDs remained as such on books for 5 years–Remove from proved category if no reasonable certainty of development within 5 years
* Explain reasons for material changes in PUDs year-to-year
* Where "special circumstances" exception to 5-year rule was relied on, disclose estimates for particular PUD locations & conditions preventing their earlier booking as producing
Some reference examples from SEC
Letter Dated: October 29, 2010
Topic: Proved Undeveloped Reserves
Reference: 12/31/2009 20-F Filing
“We note your discussion of reserves that remain proved undeveloped for five or more years. Describe for us the specific field or projects involved. For each field or project, explain, in greater detail, the reason why the reserves remain undeveloped. Also, tell us the volume of reserves at issue, by field or project and in total.”
and
Letter Dated: March 31, 2010
Topic: Proved Undeveloped Reserves
Reference: 12/31/2009 10-K Filing
“You state that you developed 81 million barrels equivalent of proved undevelopedreserves in 2009. This represents approximately 19% of your total proved undeveloped reserves at year end 2008 and 10% of your proved undeveloped reserves at year end 2009.
This rate of development of your prov ed undeveloped reserves at year end 2009 suggests that it will take approximately 10 years to develop all of your proved undeveloped reserves, assuming that no additional proved undeveloped reserves are added during that time.
As proved undeveloped reserves should generally be developed within five years of initially booking them as proved, please tell us your plan to accomplish this.”
and
Letter Dated: September 29, 2011
Topic: Disclosure of Detailed Reserve Reports Questions #17: (continued)
"Please furnish to us the petroleum engineering reports you used as the basis for your June 30, 2011 proved reserve disclosures including the following:
* Engineering exhibits (e.g. narratives, maps, rate/time plots, volumetric calculations, analogy well performance) for each of the three largest wells/locations in the proved developed and proved undeveloped categories as well as the AFE for each of the three PUD properties. Please ensure that the decline parameters, EURs and cumulative production figures are presented on the rate/time plots."
And so the question morphs to, what would the Proven Reserves have been if SEC guidelines were used - would it have been different? Would MAD have looked as attractive on a peer multiple?
GLTA.
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