Resolving the Paradox: Reserves and Contingent Resources Evaluation in the Paradox Basin
Sproule ERCE conducted an independent audit for an energy company’s reserves and contingent resources at the White Sands Unit in Utah’s Paradox Basin. The project involved evaluating complex tight gas and condensate reservoirs with challenging geology and limited production history. Sproule ERCE applied comprehensive data reviews, reservoir simulations, and economic analyses to classify reserves and resources accurately. The audit delivered clear volume classification and value estimates, enhancing investor confidence and supporting phased development planning under uncertain conditions.
Project Highlights
- Validated reserves of over 245 billion cubic feet of gas and 7 million barrels of oil and resources of over 117 billion cubic feet of gas and 3 million barrels of oil
- Integrated geologic evaluations with detailed reservoir simulations to deliver a full range of economic models
- Provided robust economic valuation using current market prices and cost assumptions
- Identified key risks to guide client’s risk management and development strategy
Challenges
Complex Geology with Fractures: The reservoir’s natural fracturing and structural complexity made modeling fluid flow difficult and uncertain. Limited production history added to the challenge of defining reserves accurately. This complexity risked misclassifying resources and reserves.
Uncertain Economic Conditions: Fluctuating market prices and varying development scenarios created difficulty in assessing commercial viability. Accurate economic evaluation was essential to support investment decisions. Development scenarios needed careful financial modeling to capture risks.
Permitting Approvals for Oil, Gas, and Disposal Add Complexity to Planning: Development required navigating approvals and managing drilling of 20 horizontal wells on 25,000 acres, including both reserves and contingent resources wells. Timing and regulatory processes introduced potential delays and risks impacting project value and planning.
Uncertain Economic Conditions: Fluctuating market prices and varying development scenarios created difficulty in assessing commercial viability. Accurate economic evaluation was essential to support investment decisions. Development scenarios needed careful financial modeling to capture risks.
Permitting Approvals for Oil, Gas, and Disposal Add Complexity to Planning: Development required navigating approvals and managing drilling of 20 horizontal wells on 25,000 acres, including both reserves and contingent resources wells. Timing and regulatory processes introduced potential delays and risks impacting project value and planning.
Solutions
Combined Thorough Data and Modeling: We audited all available geological and production data and integrated history-matched reservoir simulations (predictive computer models) for accuracy. This approach ensured our reserve classifications reflected real reservoir behavior.
Tailored Economic Valuation: We developed multiple development scenarios incorporating audited capital and operating costs and current market prices. Discounted cash flow analysis (future cash value estimation) provided realistic reserve net present value estimates.
Collaborative Reporting and Risk Guidance: We worked closely with the client to map reserves according to reservoir continuity and well spacing. Our report identified key risks and uncertainties, enabling clear communication to investors and support for phased development decisions.
Tailored Economic Valuation: We developed multiple development scenarios incorporating audited capital and operating costs and current market prices. Discounted cash flow analysis (future cash value estimation) provided realistic reserve net present value estimates.
Collaborative Reporting and Risk Guidance: We worked closely with the client to map reserves according to reservoir continuity and well spacing. Our report identified key risks and uncertainties, enabling clear communication to investors and support for phased development decisions.
Benefits
Enhanced Investor Confidence: Our independent, PRMS-compliant verification assured stakeholders about the volumes and value of reserves and contingent resources. This trust helped the client attract and maintain investment.
Improved Decision-Making: Accurate classification and valuation provided the client with clear insights into project potential and risks. This clarity facilitated strategic planning and risk management.
Support for Phased Project Development: By highlighting regulatory and operational challenges, the client could prioritize actions and schedule drilling efficiently. This approach balanced risk and opportunity for better project outcomes.
Improved Decision-Making: Accurate classification and valuation provided the client with clear insights into project potential and risks. This clarity facilitated strategic planning and risk management.
Support for Phased Project Development: By highlighting regulatory and operational challenges, the client could prioritize actions and schedule drilling efficiently. This approach balanced risk and opportunity for better project outcomes.