Question

(Answer this question like an essay)

(Oil and gas Accounting)

1_ compare between proved development reserve and proved un-development reserve and explain the accounting implication?

2_ explain the theoretical accounting logics underlining the successful efford method and full cost method ?

3_ describe the development activities & production activities, state the differences between them and provide an example of journal entries of each one.  

Answer 1

1. Proved Development Reserve - Quantity of energy sources (coal, gas, oil) expected to be recovered from existing mines or wells with the existing equipment and under the existing operating conditions. PDR are estimated after testing by a pilot project or after confirming the projected level of increased recovery will be achieved.

Proved Undevelopment Reserves - Quantity of energy sources (coal, gas, oil) expected to be recovered from new mines or wells, or from the existing ones after a major expenditure for increased recovery. PUD for new acreage are confirmed through the existing productive geologic formations, and for the existing acreage from proven enhanced recovery techniques.