Oil and Natural Gas Reserve Prices: Addendum to CEEPR
WP 03-016; Including Results for 2003 and Revisions to 2001
by
M.A. Adelman and G.C. Watkins
05-013
March 2005
Oil and Natural Gas Reserve Prices: Addendum to CEEPR WP 03-016
Including Results for 2003 and Revisions to 2001
CEEPR Working Paper 2005-013
M.A. Adelman, Massachusetts Institute of Technology
and
G.C. Watkins, University of Aberdeen and Cerecon Limited*
March 2005
Introduction. A working paper entitled “Oil and Natural Gas Reserve Prices 1982-2002:
Implications for Depletion and Investment Cost” was published in October 2003 (cited
hereafter as Adelman & Watkins [2003]). Since then we have obtained data for 2003 and
estimated oil and natural gas reserve prices for that year. We have also revised our
previous estimates of reserve prices for 2001.
This addendum paper reports on the nature and significance of the results for
2003 and the revisions to 2001. We have also extended the analysis by adding two new
features. First is the expression of reserve prices in real terms – previously we had only
reported nominal prices. Second, we have estimated levelized or constant field prices that
appear to underlie reserve prices, for each year. We refer to these as planning prices.
Previously we had only published estimated growth rates in field prices from levels
prevailing for a given year, congruent with our estimates of reserve prices.
Section 1 of this Addendum paper highlights the 2003 results. Section 2 discusses
the revisions for year 2001. Section 3 outlines the nature of the analytical extensions,
presents the results, and discusses what they show. Concluding remarks are in Section 4.
Adelman & Watkins [2003] included an extensive set of tables in Appendices.
The revisions to all these tables to include 2003 and revised 2001 data are attached here
as Appendices.
This paper is to be read in conjunction with, not as a substitute for, Adelman &
Watkins [2003]: analysis and description in the 2003 paper is not repeated here.
1. Results: 2003.
Transaction Characteristics. As before, the source of our data on reserve
transactions was the Scotia Group. The number of usable transactions for 2003 was 40,
the lowest since 1986 1 . Of these, four were identified as outliers (for outlier criteria, see
discussion in Adelman & Watkins [2003, pp13-14]).
1
Of the 40 transactions, 5 were ‘pure’ oil, 23 ‘pure’ gas (‘pure’ refers to transactions where only oil or gas
reserves were identified).
1
In common with all other years of the data set, the distribution of transaction
values was skewed to the left (though less so than for other years) and the hypothesis of
log Normality was not rejected. The four outliers were of larger than average value: the
mean transaction value fell from some $150mm for the 40 observations (before exclusion
of outliers) to $120 mm for the 36 observations (after exclusion of outliers).
Regression Results. Linear regression (without a constant) of all transaction
values on oil and natural gas reserve volumes disclosed an oil reserve price of $9.87/bbl
and $1.12/mcf for gas 2 . After elimination of the four outliers, the reserve prices changed
to $8.17/bbl and $1.19/mcf respectively 3 .
These values marked a very noticeable increase compared with 2002 of $2.43/bbl
or about 40 per cent for oil, $0.31/mcf or 35 per cent for gas (variation is for results after
exclusion of outliers) 4 .
Reserve Status. As in Adelman & Watkins [2003] tests were made of whether
reserves were on production or not would influence reserve values. In the case of oil, the
2003 observation set (excluding outliers) did not provide evidence that reserves on
production exhibited higher values than those that were seemingly fallow. In contrast, for
gas the conclusion was that shut-in reserves had higher reserve prices than those on
production. If valid, we ascribe this result to expected appreciation of in-ground reserves
by the time they are produced, without dilution by interim production.
Influence of R/P Ratio. Year 2003 did not provide evidence that, other things
equal, the higher the R/P ratio, the lower the reserve price. In the case of oil, although the
coefficient intended to detect any such influence had the expected sign, it was
insignificant; for gas the corresponding coefficient was virtually zero.
Reserve Prices and Field Prices. Our interest here relates to the influence of field
prices (prices for flowing oil) on in-ground prices. Addition of 2003 to the regression of
reserve prices on contemporary prices, prices lagged one year, and prices lagged two
years did not appreciably affect the earlier results. Oil reserve prices remained positively
and significantly affected by field prices: about 15 per cent of any change in field prices
would be reflected in reserve prices (but the degree of linear fit of the three oil equations
remained modest).
Natural gas reserve prices were positively related to field prices; moreover, in the
case of contemporary prices and prices lagged one year, the coefficient was now
significant; about 10 per cent of any change in field prices would be reflected in reserve
prices (as before, the linear fit remained trivial).
2
The adjusted R2 was 0.93. Both reserve values were strongly significant. Estimation of the equation with
an intercept revealed it was not significant.
3
Adjusted R2 was 0.97; both reserve coefficients highly significant. An intercept, when inserted in the
equation, was found to be negative and significant. However, it had little impact on the reserve coefficients
in comparison with its value when the intercept was suppressed.
4
The results on reserve prices are discussed in more detail in Section 3.
2
Reserve Prices and Hotelling Values. Hotelling’s valuation principle (HVP) sees
the in-ground price of a mineral as equal to the prevailing net field price (field price less
operating cost). The 2003 Hotelling oil reserve value was more than double our estimated
reserve price, equivalent to over 20 standard deviations above it. As with almost every
other year, the results for 2003 do not support the HVP. The conclusions for gas were
similar: the ratio for the HV to the reserve price was 2.7, representing a spread between
them of 32 standard deviations.
Implicit Growth Rates in Prices. Implicit growth rates in field prices embedded in
reserve prices can be estimated, given some simplifying assumptions. For oil, the reserve
price in 2003 of $8.17/bl did not seem to anticipate any change in field prices, up or
down (the 95 per cent confidence interval was about three percentage points either side).
The natural gas value of $1.45/mcf appeared to reflect a seven per cent annual reduction
in field prices (the confidence interval was a symmetrical two percentage points) 5 .
Returns to Holding Reserves. The HVP implies in-ground prices increase in
adjacent years at industry’s discount rate. In 2003, the rise in both oil and gas reserve
prices exceeded the discount associated with minimum risk by a considerable margin.
2. Revised Results: 2001.
The results for 2001 as published in Adelman & Watkins [2003] showed an
increase in reserve values over year 2000 values of about 19 per cent in the case of oil,
but more than doubled in the case of natural gas (which then fell as dramatically in 2002).
The numbers quoted related to the equation without a constant and excluding outliers 6 .
Such an unusual spike in natural gas prices suggested revisiting the underlying
transaction data. We examined all the 61 observations used in Adelman & Watkins
[2003] to check again for irregularities, unusual values, transactions that involved
international assets, transactions that employed ‘barrels of oil equivalence’ and so forth.
This additional scrutiny identified 11 observations of doubtful parentage, and
these were added to the list of excluded transactions. Hence the original 61 observations
were reduced to 50. Of the 50, four were identified as outliers, leaving 46 observations
after their exclusion. Of the original 61 observations, nine outliers had been identified,
leaving 52 observations after outliers. Thus the difference between the original number of
observations excluding outliers and the corresponding revised number is six (52 less 46).
Hence of the original observations, on a net basis five outliers (9 less 4) were
subsequently eliminated from the data set 7 .
5
In Section 3 we estimate implicit levelized field prices embedded in reserve prices.
See Table B-2a, Adelman &Watkins [2003, p66].
7
It so happens that these five observations identified as outliers in Adelman & Watkins [2003] were five of
the 11 observations eliminated from the data set in the review.
6
3
Transaction Characteristics. The reduced data set did not shift the leftward
distribution of transaction values; log Normality would not be rejected for the 50
observation set. The four outliers were of larger than average value: the mean transaction
value fell from $127mm for the 52 observations to $101mm for the 46 observations. And
in physical terms, the mean reserve sizes fell.
Regression Results. Linear regression (without a constant) of the 50 transaction
values on oil and natural gas reserve volumes disclosed an oil reserve value of $6.40/bl
and $1.32/mcf for gas 8 . After elimination of the four outliers, these reserve values
changed to $5.75/bl and $1.45/mcf respectively 9 .
The revised year 2001 oil reserve value of $5.75/bbl (after exclusion of outliers)
was an increase of about a third over the original value of $4.21/bbl in Adelman &
Watkins [2003]. The natural gas reserve value fell from $1.68/mcf to $1.45/mcf, or by
some 15 per cent. In short, the original analysis tended to underestimate oil reserve values
but overestimate gas reserve values.
Reserves Status. Tests of whether reserve prices were influenced by reserves
being on production or not disclosed no evidence that reserves on production exhibited
higher in-ground values than those seemingly fallow. In the case of oil this result was
consistent with the original results; in contrast, for gas the original results had suggested
that shut-in reserves had significantly higher reserve prices than those on production.
Influence of R/P Ratio. For oil, the coefficient intended to detect whether R/P
ratios influenced reserve values now had the expected (negative) sign, although it was
insignificant (in the original results it had been positive but insignificant). For gas, the
corresponding coefficient remained negative and significant.
Reserve Prices and Field Prices. The revised 2001 reserve prices had little impact
on the results after inclusion of year 2003, reported on above. For oil, the effect of a
change in field prices on reserve prices went up slightly to 16 per cent, and the degree of
equation fit improved marginally. For gas, there was no appreciable change.
Reserve Prices and Hotelling Values. The ratio of the Hotelling value to the oil
reserve prices remained well over two (2.5), although falling from 3.4 beforehand. The
spread between the two values was 8.7 standard deviations, a result that continued to
provide no support for the HVP. In the case of gas the ratio increased from 1.6 originally
to 1.8, with a spread of 7.5 standard deviations – again, no support for the HVP.
Implicit Growth Rates in Prices. The revised 2001 oil reserve price was
associated with an increase in the implicit annual growth rate in field prices from minus
8
The adjusted R2 was 0.98. Both reserve values were strongly significant. When the equation was estimated
with an intercept, the latter was insignificant.
9
Adjusted R2 was 0.97; both reserve coefficients highly significant. An intercept, when inserted in the
equation, was found to be negative and significant. However, it had little impact on the reserve coefficients
estimated when it was suppressed.
4
nine per cent to minus two per cent (the 95 per cent confidence interval was wide at about
10 percentage points either side). The natural gas value of $1.45/mcf suggested a two per
cent annual growth rate in field price, below the four per cent previously (the confidence
interval is about a symmetric four percentage points, modestly higher than beforehand).
Returns to Holding Reserves. The increase in the oil reserve value enhances the
‘surplus’ apparent achieved risk premium over minimum levels already observed with the
original data. In the case of natural gas, the achieved risk premium fell with the lower gas
reserve value, but still remained comfortably above minimum levels.
3. Extensions to Analysis.
In this section we report on reserve prices after adjustment for inflation and
comment on the trends revealed. We also specify estimation of levelized field prices and
review those results.
Reserve Values after Adjustment for Inflation. In Adelman & Watkins [2003] all
estimated reserve values were shown in money-of-the day terms. Now we display them
also in real terms. To do this, three indexes were considered: the US Consumer Price
Index (CPP); the US GDP Price Index (GDPPI); and the US Producer Price Index (PPI).
Reserve values are an alternative to piecemeal sales at wholesale prices, hence a retail
price index would not be suitable. The GDPPI is preferable to the CPI, but its breadth is a
disadvantage here. The PPI was selected as the best option.
The oil reserve values in $/bbl are shown in Table 1 and plotted in Figure 1; those
for natural gas (in $/mcf) are listed in Table 2 and plotted in Figure 2. The estimates in
the tables and plots are with outliers excluded and without an intercept. They are shown
in both nominal and real terms, with the adjustment for inflation made by applying the
US producer price index (2003 = 1.0). Adjustments using the GDPPI or CPI index
resulted in higher real values than under the PPI.
Figure 1 reveals no visible secular trend in oil reserve prices, 1982-2003.
Sometimes prices fall, sometimes they rise, as they have recently – but to levels in 2003
only marginally higher than at the previous peak in 1985 in money-of-the-day terms.
In real terms, oil prices tended to fall from the mid-1980s until the mid-1990s.
Between then and year 2000 they were quite flat. Since year 2000 reserve prices have
moved to distinctly higher levels, as field prices used in company evaluations have
increased. This registered OPEC’s new found quota discipline and resulting ability to
keep wellhead prices comfortably above $20/bbl. Nevertheless the estimated 2003 oil
reserve price after adjustment for inflation is still around 20 per cent below the 1985
peak.
Figure 2 shows close to a plateau in natural gas reserve prices from 1986 to year
2000 in terms of money-of-the-day. Since then they have risen, including an unusual blip
5
in 2001. The 2003 natural gas reserve price remains below real levels of the mid 1980s
(excepting 2001).
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Table 1: Estimates of In-Ground Crude Oil Prices, United States, 1982-2003
(nominal and real terms)
In-Ground Oil Price
In-Ground Oil Price
($US/bbl)
Year
($US/bbl)
Nominal $
$2003 (1)
Nominal $
$2003 (1)
7.13
10.22
1993
3.54
4.07
3.37
4.75
1994
2.9
3.31
6.95
9.6
1995
3.81
4.27
7.74
10.6
1996
3.67
4.00
5.10
7.08
1997
5.01
5.45
4.40
5.98
1998
2.85
3.12
5.69
7.55
1999
3.59
3.87
4.61
5.81
2000
3.55
3.68
3.64
4.38
2001
5.75
5.85
4.44
5.23
2002
5.74
5.92
4.14
4.81
2003
8.17
8.17
(1) Expressed in US$2003 using US Producer Price Index
Source: Adelman & Watkins [2003, Table B-2a] and Adelman & Watkins [2005].
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Table 2: Estimates of In-Ground Natural Gas Prices, United States, 1982-2003
(nominal and real terms)
Natural Gas Price
Natural Gas Price
($US/bbl)
Year
($US/bbl)
Nominal $
$2003 (1)
Nominal $
$2003 (1)
1993
0.36
0.51
0.87
1
1994
0.64
0.91
0.77
0.88
1995
0.86
1.19
0.60
0.68
1996
0.52
0.72
0.69
0.75
1997
0.96
1.34
0.93
1.01
1998
1.02
1.39
0.62
0.68
1999
0.99
1.31
0.67
0.73
2000
0.88
1.11
0.75
0.78
2001
0.90
1.08
1.45
1.48
2002
0.87
1.02
0.88
0.91
2003
0.82
0.96
1.19
1.19
(1) Expressed in US$2003 using US Producer Price Index
Source: Adelman & Watkins [2003, Table B-2a] and Adelman & Watkins [2005].
6
Figure 1: Estimates of US Oil Reserve Prices, 1982-2003
12.2
Reserve Price ($US/bl)
10.2
8.2
6.2
4.2
2.2
0.2
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Year
Nominal Prices
Real Prices, adj by US PPI
Figure 2: Estimates of US Natural Gas Prices, 1982-2003
1.60
Reserve Price ($US/mcf)
1.40
1.20
1.00
0.80
0.60
0.40
0.20
1982
1984
1986
1988
1990
1992
1994
1996
1998
Year
Nominal Prices
7
Real Prices, adj by US PPI
2000
2002
Levelized Field Prices Implicit in Reserve Prices. In Adelman & Watkins [2003], for
any given level of reserve prices we derived implicit field price expectations. The
approximation was expressed as expected growth rates from prevailing field prices –
negative or positive.
Another way of looking at field prices seemingly embedded in reserve prices is to
express them as equivalent constant prices, that is, as levelized prices over the reserve’s
life. This approach has more in common with industry practice in evaluating reserve
properties of adopting a flat price for estimating cash flow, rather than to assume a price
trend. The flat price might be in nominal or real terms. The industry vernacular refers to
price used for project appraisal as the ‘price deck’.
After making some simplifying assumptions, the general expression for the
uniform ‘planning’ price implicit in the price of a reserve in the ground is given by:
PL = V(a + i)/a + c.
(1).
where PL = uniform planning field price
a = production decline rate, percentage per year
i = discount rate
V = reserve price
c = unit extraction cost.
This formula can be derived from expression (6) in Adelman & Watkins [2003, p32] after
setting g, the growth rate equal to zero, and then solving for price 10 .
The results of applying (1) are shown in Table 3 for both oil and natural gas. The
respective series are plotted in Figures 3 (oil) and 4 (gas). Each plot also shows actual
field prices.
From the mid 1980s to the late 1990s fixed planning prices for oil were close to
actual prices; but from 1999 to 2002 planning prices were consistently below actual
prices – the implication was that parties making oil reserve transactions did not see
realized field prices as being sustainable. In 2002 and especially 2003 that mood had
seemingly changed, and indeed in 2003 oil planning prices approximated actual prices.
In the case of natural gas, from the mid-1980s to the mid 1990s planning prices
were consistently above actual field prices, an indication that corporations misjudged the
impact of deregulation. From the mid 1990s on, there was a close approximation between
planning and actual prices, except in 2003, when actual field prices appreciably exceeded
planning prices.
10
The planning prices estimated from equation (1) are related to those expressed in terms of growth rates
(see earlier) in the following way: an expected positive growth rate in field prices would be associated with
a planning price that exceeded the actual field price for the year in question, and vice versa.
8
Table 3: Oil and Natural Gas Planning Prices, 1982-2003
Oil
($/BBL)
37.70
20.28
33.76
33.33
17.83
17.54
20.97
19.16
17.92
18.29
16.23
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Natural Gas
($/MCF)
2.39
3.52
4.54
2.90
3.64
3.84
3.73
3.11
3.16
2.94
2.67
Oil
($/BBL)
13.20
12.14
14.57
15.53
18.29
10.37
13.85
18.33
20.66
19.84
26.45
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Natural Gas
($/MCF)
2.65
2.50
1.96
2.32
2.90
1.96
2.19
2.93
4.37
2.73
3.96
Figure 3: Oil Planning Prices (Derived from Reserve
Values) and Actual Field Prices, 1982-2003
40.20
Reserve Price ($US/bl)
35.20
30.20
25.20
20.20
15.20
10.20
5.20
0.20
1982
1984
1986
1988
1990
1992
1994
1996
1998
Year
Oil Planning Price
9
Actual Oil Field Price
2000
2002
Figure 4: Natural Gas Planning Prices (Derived from
Reserve Values) and Actual Field Prices, 1982-2003
6.20
Reserve Price ($US/mcf)
5.20
4.20
3.20
2.20
1.20
0.20
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Year
Natural Gas Planning Price
Actual Natural Gas Field Price
4. Concluding Remarks.
Addition of the year 2003 to the data base, and revisions to previous estimates of
reserve prices for 2001 do not alter the main character of the results in Adelman &
Watkins [2003]. This applies to our findings on the influence of reserves status, R/P
ratios and field prices on reserve prices. The Hotelling Valuation Principle continues to
provide little or no clue on what industry pays for in-ground reserves.
Yet the reserve prices estimated for 2003 do inject new information on how
industry is valuing reserve assets. The strong rise in oil reserve prices provides a clear
indication that field prices in the mid $20s per barrel are viewed more as a floor than as a
ceiling, and that prices in the teens are not countenanced. This picture is illustrated by the
estimates of planning prices underlying the prices paid for developed reserves.
It also follows that if development costs have increased to a lesser degree than the
40 per cent increase in reserve prices estimated in 2003, then an additional margin is
available to cover finding costs – increasing the attraction of more expensive sources of
reserve additions.
Reassessment of reserve prices in 2001 suggested our earlier estimates were too
low in for oil, too high for natural gas. Although we are now carrying a lower reserve
price for natural gas, the sharp blip in comparison with year 2000 remains. This seems to
be attributable to euphoria over the strong increases in field prices after 1999, before a
collapse in 2002.
10
Some might conclude that the increase in oil reserve prices in 2003 was evidence
of nascent shortages. This inference would be false. Tighter world supply and resulting
higher prices demonstrated OPEC’s improved ability to control a surplus, not its
extinction. Greater OPEC discipline was not lost on market participants – it translated in
to amounts paid for reserves in the ground, amounts that were still below those paid in
1985, in real terms.
Explanation of higher prices being paid for natural gas reserves in 2003 does not
parallel that for oil. While more of an international market is just being to emerge for
natural gas, by far the main determinant of prices remains the conditions in North
America. Here, higher prices do register tighter supply and a climb up the supply curve.
APPENDICES
11
Table A-1: Number of Identified Transactions
1
Year
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2
3
4
5
6
7
8
9
10
All Inclusive
Number of Outliers
Excluding Outliers
All Types Pure Oil Pure Gas All Types Pure Oil Pure Gas All Types Pure Oil Pure Gas
1592
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
345
1
2
8
5
3
12
14
19
38
20
20
28
17
35
31
16
19
13
15
10
14
5
435
0
1
1
4
3
5
9
18
29
18
20
28
33
33
31
27
45
26
28
17
36
23
106
1
1
3
1
2
2
2
5
9
7
6
7
6
10
6
5
8
5
4
4
8
4
32
0
0
1
0
0
2
1
1
3
1
2
1
2
5
1
3
3
1
1
1
3
0
29
0
0
0
0
0
0
0
0
2
0
2
2
2
2
2
1
3
2
2
3
4
2
1486
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
313
1
2
7
5
3
10
13
18
35
19
18
27
15
30
30
13
16
12
14
9
11
5
406
0
1
1
4
3
5
9
18
27
18
18
26
31
31
29
26
42
24
26
14
32
21
Outliers are defined as follows:
For pure transactions, a reserve price more than two standard deviations for that year.
For mixed transactions, a transaction value more than two standard deviations away from the fitted
value.
Transactions of value less than $0.55 per barrel or $0.10 per mcf, or greater than $27.50 per barrel
or $5 per mcf.
Source: The Scotia Group M&A Database, January 2004
Table A-2: Summary Statistics for Transaction Values, All Transactions
[Millions of Nominal $, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
99.5
480.4
103.7
979.0
232.5
133.7
36.9
95.4
40.8
30.3
29.1
39.7
37.9
38.8
32.8
35.5
120.1
114.0
35.0
216.2
239.0
178.4
150.5
276.9
1569.7
224.3
2918.8
913.1
243.6
100.4
343.2
106.5
80.3
85.2
134.6
115.7
90.6
74.5
93.8
238.2
494.6
54.8
600.3
597.9
326.1
145.3
16.6
38.0
14.4
39.2
17.4
10.5
7.0
7.2
8.1
5.6
5.0
5.2
7.0
9.7
8.3
11.0
26.4
17.0
14.5
23.9
42.5
62.0
106.0
2.70
3.27
2.16
2.98
3.93
1.82
2.72
3.60
2.61
2.65
2.92
3.39
3.06
2.33
2.27
2.64
1.98
4.34
1.57
2.78
2.50
1.83
0.97
4.80
3.32
2.37
3.32
5.41
1.99
4.89
6.22
5.51
4.77
4.71
6.92
6.81
4.02
4.09
5.88
4.22
6.41
2.65
4.73
3.26
2.97
0.99
30.21
12.04
7.13
12.93
31.07
5.98
28.99
44.65
38.79
29.41
25.56
56.16
56.70
20.01
21.61
41.81
24.18
42.60
9.38
25.84
12.45
11.89
3.02
--Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1592
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-3: Summary Statistics for Transaction Values, Excluding Outliers
[Millions of Nominal $, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
47.4
61.2
74.5
320.2
80.5
78.2
19.8
56.3
28.3
16.8
13.5
19.0
20.4
20.0
19.1
20.7
85.5
42.3
22.4
116.0
101.0
106.7
119.9
90.4
63.2
182.2
1047.2
161.2
143.2
35.8
142.9
59.7
32.3
22.6
33.6
31.8
29.6
31.2
28.2
120.8
55.5
24.0
209.3
217.2
141.9
112.5
15.0
32.0
13.8
33.7
16.8
10.1
6.0
6.7
8.0
5.0
5.0
4.4
7.0
8.2
8.0
10.5
25.1
17.0
13.7
22.0
32.2
60.0
95.5
1.72
1.03
2.45
3.27
2.00
1.83
1.81
2.54
2.11
1.93
1.67
1.77
1.56
1.48
1.64
1.36
1.41
1.31
1.07
1.80
2.15
1.33
0.94
2.87
0.76
3.20
4.66
2.97
1.86
2.81
3.66
4.99
3.12
2.82
2.85
2.77
2.59
2.89
2.90
1.72
1.82
1.61
2.42
4.76
2.63
0.87
12.58
1.90
12.48
24.10
11.02
4.89
10.23
15.73
34.37
12.33
11.39
11.85
11.32
9.95
11.29
13.11
5.39
5.63
5.16
8.05
28.23
10.44
2.72
--Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1486
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-4: Summary Statistics for Pure Oil Transaction Values, Excluding Outliers
[Millions of Nominal $, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
159.3
14.0
263.4
8.3
32.9
4.2
79.6
21.3
10.1
14.6
12.3
13.8
19.7
18.4
19.5
93.2
48.9
15.1
57.5
21.3
157.0
85.3
--17.6
633.7
10.4
43.9
6.6
189.3
47.5
27.6
24.1
28.4
15.1
29.7
39.4
33.5
122.0
51.4
21.4
106.6
35.0
213.3
118.1
159.3
14.0
18.7
4.2
15.0
1.7
2.9
3.5
1.3
2.9
2.4
7.8
6.2
2.6
8.7
18.7
36.3
7.5
11.6
4.0
58.0
46.1
--1.26
2.41
1.25
1.33
1.56
2.38
2.23
2.72
1.65
2.30
1.09
1.51
2.14
1.72
1.31
1.05
1.42
1.85
1.64
1.36
1.38
--0.00
2.04
1.34
0.62
2.43
2.48
3.15
4.72
1.70
2.95
1.55
2.00
2.95
3.44
1.08
1.46
1.79
2.32
1.62
1.98
1.44
--1.00
5.16
3.01
1.50
7.34
7.80
12.06
25.64
4.19
10.56
4.89
6.07
10.61
15.44
2.46
4.78
4.71
7.51
4.19
5.94
3.17
--Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1
2
7
5
3
10
13
18
35
19
18
27
15
30
30
13
16
12
14
9
11
5
--- Insufficient data points.
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-5: Summary Statistics for Pure Natural Gas Transaction Values, Excluding Outliers
[Millions of Nominal $, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
--7.5
294.0
72.0
137.6
9.2
83.1
25.0
18.1
26.5
9.5
28.2
20.3
24.9
24.5
58.6
42.5
26.6
146.8
60.1
92.5
118.9
------54.9
231.6
7.9
237.0
40.8
31.1
38.5
14.5
41.1
34.1
31.2
29.8
95.3
49.8
26.7
227.6
104.5
123.0
119.5
--7.5
294.0
64.8
4.3
7.3
3.2
5.7
4.3
9.4
3.1
6.6
7.4
11.4
12.1
22.6
19.8
18.2
44.3
28.9
56.8
100.00
------0.76
1.68
0.86
2.85
1.63
1.72
1.45
1.52
1.46
1.68
1.25
1.22
1.63
1.17
1.00
1.55
1.74
1.33
1.01
------0.43
0.71
1.10
2.47
2.22
2.25
1.57
2.02
2.08
2.82
1.94
2.20
2.26
1.71
1.34
2.11
2.80
2.18
1.12
------1.97
1.50
2.77
7.12
6.74
7.01
3.97
6.46
7.12
11.00
5.80
7.34
6.80
5.55
4.25
6.55
9.82
7.21
3.22
------Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
0
1
1
4
3
5
9
18
27
18
18
26
31
31
29
26
42
24
26
14
32
21
--- Insufficient data points.
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-6: Summary Statistics for Size of Oil Reserves, All Transactions
[Millions of Barrels, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
9.8
53.3
12.8
137.3
24.2
7.4
4.7
5.7
2.2
3.1
2.2
3.7
2.1
3.6
3.8
3.1
12.8
20.6
1.9
22.2
5.9
9.3
6.6
37.4
181.7
28.8
477.7
115.6
16.5
16.8
18.6
4.4
13.9
7.5
12.1
4.5
10.8
16.1
6.9
47.4
118.7
5.3
111.2
14.3
24.2
8.2
0.5
1.7
0.8
2.0
0.6
0.4
0.5
0.6
0.5
0.3
0.2
0.4
0.4
0.3
0.3
0.3
0.8
0.0
0.3
0.3
0.3
0.0
3.6
3.36
3.41
2.25
3.48
4.78
2.22
3.62
3.27
2.02
4.47
3.44
3.25
2.07
3.00
4.17
2.26
3.70
5.76
2.86
5.02
2.42
2.61
1.26
5.42
3.32
2.24
3.66
5.54
2.96
4.85
4.92
4.00
7.68
6.18
5.49
3.91
5.20
8.37
3.36
6.96
7.10
5.20
6.54
4.02
3.65
2.35
38.06
12.04
6.54
14.69
32.14
11.55
25.69
27.53
22.74
68.52
46.48
35.73
21.96
33.14
81.30
14.22
54.47
54.08
33.12
46.88
20.56
16.56
8.32
--Not Rejected
Not Rejected
Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1592
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-7: Summary Statistics for Size of Natural Gas Reserves, All Transactions
[BCFs, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
58.1
178.3
59.9
414.1
109.3
111.0
14.4
57.5
30.3
23.3
19.9
26.7
26.9
23.3
24.5
24.6
71.1
57.3
32.7
141.4
154.5
104.9
121.8
153.7
564.7
181.0
1259.9
366.9
229.3
24.0
220.8
72.9
80.5
55.1
94.5
63.5
49.2
55.0
54.8
154.1
180.4
54.6
349.1
439.5
234.8
121.2
9.9
9.9
3.6
13.8
10.8
7.0
4.9
3.6
7.8
3.2
2.7
4.0
3.9
4.7
3.5
4.9
11.1
11.9
11.1
15.5
21.2
26.1
102.0
2.65
3.17
3.02
3.04
5.26
2.07
1.67
3.84
2.41
3.45
2.76
3.54
2.36
2.11
2.24
2.23
2.17
3.15
1.67
2.47
2.84
2.24
0.99
4.64
3.27
3.78
3.29
5.04
2.35
2.22
5.94
4.85
7.57
4.24
6.09
3.85
3.37
3.49
5.42
4.20
7.32
2.58
4.31
3.68
4.18
1.87
29.49
11.82
16.34
12.63
27.95
7.55
7.11
40.41
29.51
68.64
21.12
40.45
19.30
14.50
15.87
40.05
24.31
62.11
9.53
24.39
15.47
23.45
8.09
--Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Rejected
Not Rejected
Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1592
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-8: Summary Statistics for Reserve Size in Thermal Equivalence, All Transactions
[Trillion BTUs, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
111.1
471.4
130.5
1169.4
242.3
151.8
39.9
88.8
42.4
40.4
31.9
47.1
38.7
43.2
45.7
41.4
141.6
170.6
42.9
263.3
187.0
155.9
121.9
315.5
1562.3
305.8
3746.3
998.4
291.3
95.0
288.2
83.2
119.9
88.8
144.4
79.1
89.3
103.8
78.4
315.5
747.5
58.2
778.9
449.4
250.0
119.7
19.7
27.0
11.5
28.6
18.0
11.0
9.4
10.7
13.3
8.1
5.7
8.1
11.6
13.3
10.6
17.5
31.4
24.0
21.1
31.5
41.8
66.0
99.5
2.52
3.31
2.34
3.20
4.12
1.92
2.38
3.25
1.96
2.97
2.78
3.07
2.04
2.07
2.27
1.89
2.23
4.38
1.36
2.96
2.40
1.60
0.98
4.68
3.31
2.72
3.50
5.41
2.26
4.12
5.71
4.24
5.55
5.01
6.23
3.94
4.45
5.33
5.57
4.80
6.43
2.20
4.93
3.37
3.27
1.75
28.84
12.01
9.63
14.06
31.05
7.27
20.55
38.84
24.40
37.44
29.96
45.98
19.44
27.45
39.92
41.67
27.92
43.14
7.30
27.34
13.44
16.21
7.52
--Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1592
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
Trillion BTUs: 1 Trillion BTUs = 1 Billion Cubic Feet at 1,000 BTUs per cubic foot (TBTUs)
Thermal equivalence factor of 5.5 million BTUs per barrel used.
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table A-9: Summary Statistics for Reserve Size in Thermal Equivalence, Excluding Outliers
[Trillion BTUs, where relevant]
1
2
3
4
6
7
8
9
Median
5
Coeff. Of
Variation
Year
Mean
Std. Dev.
Skewness
Kurtosis
Log Normality
# Obs.
All Years
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
53.0
54.4
107.3
298.6
76.1
81.9
22.5
57.9
33.8
20.9
16.2
24.6
25.8
28.3
28.6
30.9
94.4
61.0
31.0
137.5
85.4
110.9
100.0
98.5
84.9
293.0
1060.8
177.1
148.9
34.6
139.8
60.0
39.7
25.6
39.3
36.3
42.1
47.8
36.3
121.5
87.5
34.1
243.7
164.0
144.8
86.2
17.6
26.3
9.7
28.5
17.3
10.8
8.1
9.8
12.5
7.3
5.5
7.4
11.0
12.6
10.2
17.1
30.0
23.8
21.0
23.9
39.0
59.9
73.0
1.65
1.56
2.73
3.55
2.33
1.82
1.54
2.41
1.78
1.89
1.58
1.59
1.41
1.49
1.67
1.17
1.29
1.43
1.10
1.77
1.92
1.31
0.86
2.83
2.35
3.26
4.87
4.11
1.87
2.29
3.66
4.32
3.65
2.72
2.55
2.36
2.47
2.94
1.92
1.70
2.61
1.89
2.71
4.72
2.04
0.62
12.46
7.64
12.65
25.87
20.45
4.94
7.13
15.84
27.64
18.07
10.99
9.60
8.75
8.72
11.96
6.41
5.90
11.00
6.48
10.57
28.15
6.52
2.27
--Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
Not Rejected
1486
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
Trillion BTUs: 1 Trillion BTUs = 1 Billion Cubic Feet at 1,000 BTUs per cubic foot (TBTUs)
Thermal equivalence factor of 5.5 million BTUs per barrel used.
The normality test used is Jarque-Bera; reject indicates that normality of the log distribution was rejected at 95%
confidence level.
Source: The Scotia Group M&A Database, January 2004
Table B-1a: Regression Results for All Transactions (No Constant)
1
2
# Obs
3
Oil Coeff
($/bbl)
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
7.59
4.35
3.71
5.62
2.12
5.60
6.07
4.60
4.18
3.35
6.34
2.60
5.59
3.16
6.98
2.88
3.53
4.97
4.21
6.40
6.49
9.87
4
6
7
t-stat
5
Gas Coeff
($/mcf)
t-stat
Adjusted R 2
11.03
6.89
31.85
12.72
3.26
27.45
22.13
5.38
21.33
11.18
28.07
2.26
13.28
24.01
14.71
19.48
100.81
13.38
30.18
7.75
10.92
7.61
0.35
0.65
1.02
0.73
0.97
0.94
1.20
1.21
0.48
1.16
0.75
1.49
0.74
0.88
0.95
1.13
0.76
0.86
0.75
1.32
1.21
1.12
1.58
6.19
23.36
5.38
21.16
7.38
51.47
22.58
14.49
28.97
25.82
18.08
8.36
24.44
15.92
26.45
34.03
26.30
17.90
47.96
20.15
20.42
0.99
0.92
0.99
0.99
0.97
0.94
0.99
0.88
0.84
0.97
0.98
0.83
0.81
0.91
0.90
0.95
0.99
0.94
0.96
0.98
0.90
0.93
Note: Transaction values are regressed on reserves of oil (in bbls) and natural gas (in mcf).
Source: The Scotia Group M&A Database, January 2004
Table B-1b: Regression Results for All Transactions (Constant Included)
1
2
3
4
t-stat
5
Oil Coeff
($/bbl)
Year
# Obs
Constant
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
16.54
10.91
53.79
21.18
12.79
-3.70
-9.20
-8.15
6.82
-1.42
-4.29
-9.92
1.76
-1.24
-11.88
3.25
-2.37
-3.73
19.49
-3.45
-11.82
7.75
1.36
0.67
1.76
1.86
1.31
-0.87
-2.05
-1.85
2.42
-0.82
-1.87
-1.96
0.36
-0.51
-3.60
0.41
-0.60
-1.46
1.21
-0.24
-0.65
0.60
7.79
4.22
3.70
5.96
1.96
5.64
6.17
5.17
4.10
3.37
6.41
3.23
5.57
3.18
7.41
2.87
3.53
5.17
4.20
6.48
6.65
9.52
6
t-stat
7
Gas Coeff
($/mcf)
8
t-stat
9
Adjusted
R2
11.44
6.33
32.83
12.85
3.01
26.77
22.65
5.75
20.94
11.19
28.38
2.73
12.99
23.48
15.99
18.88
100.39
13.15
30.05
7.25
10.25
6.63
0.28
0.64
1.01
0.61
0.96
1.00
1.21
1.24
0.46
1.16
0.76
1.52
0.73
0.89
1.01
1.13
0.76
0.89
0.73
1.32
1.23
1.09
1.26
6.05
23.55
4.21
20.48
6.79
52.64
22.59
13.68
28.45
26.21
18.35
7.69
22.53
17.21
24.04
32.92
23.31
16.48
45.39
18.30
14.69
0.99
0.91
0.99
0.99
0.97
0.94
0.99
0.87
0.82
0.96
0.98
0.82
0.77
0.90
0.90
0.94
0.99
0.91
0.96
0.98
0.87
0.86
Note: Transaction values are regressed on reserves of oil (in bbls) and natural gas (in mcf).
Source: The Scotia Group M&A Database, January 2004
Table B-1c: Comparisons of Oil Regression Values with Pure Oil Values for All Transactions (No
Constant)
1
2
3
# Obs
4
Weighted ppb from
Pure Oil Transactions
($/bbl)
Year
Oil Coefficient
($/bbl)
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
7.59
4.35
3.71
5.62
2.12
5.60
6.07
4.60
4.18
3.35
6.34
2.60
5.59
3.16
6.98
2.88
3.53
4.97
4.21
6.40
6.49
9.87
5
# Obs
6
Ratio of Estimated Oil
Coefficient to Pure
Transaction ppb
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
7.11
10.15
6.93
3.39
8.86
5.27
6.44
4.72
4.50
4.69
4.75
3.90
7.70
3.36
5.36
3.67
3.40
4.23
4.07
4.43
5.52
6.41
1
2
8
5
3
12
14
19
38
20
20
28
17
35
31
16
19
13
15
10
14
5
1.07
0.43
0.53
1.66
0.24
1.06
0.94
0.97
0.93
0.71
1.34
0.67
0.73
0.94
1.30
0.79
1.04
1.18
1.04
1.44
1.18
1.54
Source: The Scotia Group M&A Database, January 2004
Note: The pure oil value observations are weighted volumetrically by the barrels in each transaction for a given
year. This is equivalent to summing the value of all pure transactions in a given year and dividing by the total
volumes of oil reserves sold.
Table B-1d: Comparisons of Natural Gas Regression Values with Pure Gas Values for All Transactions
(No Constant)
.
1
2
3
4
5
6
Year
Gas Coefficient ($/mcf)
# Obs
Weighted ppmcf from
Pure Gas Transactions
($/mcf)
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.35
0.65
1.02
0.73
0.97
0.94
1.20
1.21
0.48
1.16
0.75
1.49
0.74
0.88
0.95
1.13
0.76
0.86
0.75
1.32
1.21
1.12
14
22
34
35
27
51
66
104
160
101
92
122
98
124
100
72
91
62
70
50
57
40
--1.05
1.32
1.34
0.92
0.89
1.00
1.18
0.83
0.90
0.66
0.73
0.88
0.75
0.63
0.93
0.69
0.85
0.79
1.31
1.13
1.22
# Obs
Ratio of Estimated Gas
Coefficient to Pure
Transaction ppmcf
0
1
1
4
3
5
9
18
29
18
20
28
33
33
31
27
45
26
28
17
36
23
--0.62
0.77
0.55
1.06
1.05
1.21
1.03
0.58
1.28
1.14
2.04
0.84
1.18
1.51
1.22
1.09
1.02
0.95
1.01
1.07
0.92
--- Insufficient data points.
Source: The Scotia Group M&A Database, January 2004
Note: The pure gas value observations are weighted volumetrically by the cubic feet in each transaction for a
given year. This is equivalent to summing the value of all pure transactions in a given year and dividing by the
total volumes of gas reserves sold.
Table B-2a: Regression Results for All Transactions (No Constant), Excluding Outliers
(with Robust Standard Errors, rather than OLS Standard Errors)
1
2
# Obs
3
Oil Coeff
($/bbl)
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
4
6
7
t-stat
5
Gas Coeff
($/mcf)
t-stat
Adjusted R 2
9.18
39.87
177.40
1.66
6.66
6.48
22.87
3.56
9.07
12.36
6.95
15.00
4.32
16.85
3.98
14.24
3.15
6.31
1.96
5.92
10.20
17.81
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
1.26
58.92
173.62
1.05
20.63
6.96
32.97
5.75
15.61
29.63
11.43
13.45
19.58
9.93
17.76
15.52
6.33
7.39
6.17
8.91
9.69
18.52
0.76
0.99
0.90
0.89
0.99
0.92
0.98
0.82
0.94
0.96
0.89
0.94
0.91
0.95
0.86
0.92
0.81
0.88
0.74
0.97
0.95
0.97
Source: The Scotia Group M&A Database, January 2004
Table B-2b: Regression Results for All Transactions (Constant Included), Excluding Outliers
(with Robust Standard Errors, rather than OLS Standard Errors)
1
2
3
4
t-stat
5
Oil Coeff
($/bbl)
Year
# Obs
Constant
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
26.09
8.37
16.29
21.87
0.33
-2.29
-2.36
-1.13
-0.25
-0.30
-0.70
-0.20
1.49
1.17
-0.46
-2.70
9.76
3.12
21.40
-11.25
3.82
-7.82
1.99
2.84
2.80
2.13
0.11
-2.11
-1.22
-0.40
-0.46
-0.76
-0.53
-0.34
1.69
1.40
-0.33
-0.91
2.68
1.43
2.16
-2.72
0.63
-2.14
5.71
3.28
6.88
8.22
5.09
4.61
5.72
4.69
3.65
4.47
4.17
3.56
2.82
3.76
3.71
5.08
2.54
3.24
3.17
5.85
5.67
8.54
Source: The Scotia Group M&A Database, January 2004
6
t-stat
7
Gas Coeff
($/mcf)
8
t-stat
9
Adjusted
R2
4.57
55.43
157.34
1.85
6.91
6.05
23.13
3.42
8.84
11.85
6.77
14.60
4.12
15.86
3.65
14.78
2.86
4.48
1.81
6.27
9.18
22.43
0.28
0.64
0.86
0.39
0.96
1.05
0.99
0.88
0.90
0.87
0.83
0.87
0.75
0.59
0.69
0.94
0.57
0.63
0.71
1.49
0.86
1.23
1.32
75.33
227.36
0.77
18.74
6.69
35.14
5.40
14.80
31.11
11.36
12.86
18.20
9.03
16.38
16.34
5.65
5.58
5.85
9.59
8.11
17.11
0.65
0.99
0.90
0.88
0.98
0.90
0.98
0.77
0.92
0.95
0.86
0.92
0.87
0.93
0.78
0.89
0.72
0.79
0.67
0.97
0.92
0.93
Table B-2c: Effect of Including Constant on Regression Coeffcients
(Excluding Outliers)
.
1
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2
3
4
Oil Coefficient ($/bbl)
Constant
Included
No Constant
Ratio
5.71
3.28
6.88
8.22
5.09
4.61
5.72
4.69
3.65
4.47
4.17
3.56
2.82
3.76
3.71
5.08
2.54
3.24
3.17
5.85
5.67
8.54
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
0.80
0.97
0.99
1.06
1.00
1.05
1.01
1.02
1.00
1.01
1.01
1.01
0.97
0.99
1.01
1.01
0.89
0.90
0.89
1.02
0.99
1.04
Source: The Scotia Group M&A Database, January 2004
5
6
7
Gas Coefficient ($/mcf)
Constant
Included
No Constant
Ratio
0.28
0.64
0.86
0.39
0.96
1.05
0.99
0.88
0.90
0.87
0.83
0.87
0.75
0.59
0.69
0.94
0.57
0.63
0.71
1.49
0.86
1.23
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
0.79
0.99
1.00
0.74
1.00
1.03
1.01
1.01
1.00
1.01
1.01
1.00
0.98
0.98
1.01
1.01
0.92
0.94
0.95
1.03
0.98
1.04
8
# Obs
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
Table B-2d: Effect of Outliers on Reserve Coefficients
(No Constant)
.
1
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2
3
Oil Coefficient ($/bbl)
Excluding
All Data
Outliers
7.59
4.35
3.71
5.62
2.12
5.60
6.07
4.60
4.18
3.35
6.34
2.60
5.59
3.16
6.98
2.88
3.53
4.97
4.21
6.40
6.49
9.87
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
4
Ratio
2/3
1.06
1.29
0.53
0.73
0.42
1.27
1.07
1.00
1.15
0.76
1.53
0.73
1.93
0.83
1.90
0.58
1.24
1.39
1.19
1.11
1.13
1.21
Source: The Scotia Group M&A Database, January 2004
5
6
7
Gas Coefficient ($/mcf)
Excluding
Ratio
All Data
Outliers
5/6
0.35
0.65
1.02
0.73
0.97
0.94
1.20
1.21
0.48
1.16
0.75
1.49
0.74
0.88
0.95
1.13
0.76
0.86
0.75
1.32
1.21
1.12
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
0.97
1.01
1.18
1.40
1.01
0.91
1.22
1.38
0.53
1.33
0.91
1.71
0.96
1.46
1.39
1.22
1.23
1.28
1.00
0.91
1.37
0.94
Table B-2e: Comparisons of Oil Regression Values (No Constant) with Pure Oil Values, Excluding
Outliers
1
2
3
# Obs
4
Weighted ppb from
Pure Oil Transactions
($/bbl)
Year
Oil Coefficient
($/bbl)
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
5
# Obs
6
Ratio of Estimated Oil
Coefficient to Pure
Transaction ppb
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
7.11
10.15
6.94
3.39
8.86
3.56
6.15
4.72
4.22
4.66
3.46
3.70
3.71
3.63
3.84
4.81
3.34
4.22
3.46
3.88
5.19
6.41
1
2
7
5
3
10
13
18
35
19
18
27
15
30
30
13
16
12
14
9
11
5
1.00
0.33
1.00
2.28
0.58
1.24
0.93
0.98
0.86
0.95
1.20
0.96
0.78
1.05
0.96
1.04
0.85
0.85
1.03
1.48
1.11
1.28
Source: The Scotia Group M&A Database, January 2004
Note: The pure oil value observations are weighted volumetrically by the barrels in each transaction for a given
year. This is equivalent to summing the value of all pure transactions in a given year and dividing by the total
volumes of oil reserves sold.
Table C-1: Proven Reserves to Production Ratios
.
1
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2
3
4
Crude Oil (millions of barrels)
Beginning
Year
Annual
Ratio
Reserves
Production
2/3
29426
27858
27735
28446
28416
26889
27256
26825
26501
26254
24682
23745
22957
22457
22351
22017
22546
21034
21765
22045
22446
22677
2950
3020
3037
3052
2973
2873
2811
2586
2505
2512
2446
2339
2268
2213
2173
2138
1991
1952
1880
1915
2106
1877
10.0
9.2
9.1
9.3
9.6
9.4
9.7
10.4
10.6
10.5
10.1
10.2
10.1
10.1
10.3
10.3
11.3
10.8
11.6
11.5
10.7
12.1
5
6
Natural Gas (bcf)
7
Beginning
Year
Reserves
Annual
Production
Ratio
5/6
201730
201512
200247
197463
193369
191586
187211
168024
167116
169346
167062
165015
162415
163837
165146
166474
167233
164041
167406
177427
183460
186946
17506
15788
17193
15985
15610
16114
16670
16983
17233
17202
17423
17789
18322
17966
18861
19211
18720
18928
19219
19779
20351
19425
11.5
12.8
11.6
12.4
12.4
11.9
11.2
9.9
9.7
9.8
9.6
9.3
8.9
9.1
8.8
8.7
8.9
8.7
8.7
9.0
9.0
9.6
Note: Beginning reserves indicate remaining reserves at January 1.
Source: EIA/DOE "US Crude Oil, Natural Gas, and Natural Gas Liquids Reserves"
Table B-2f: Comparisons of Natural Gas Regression Values (No Constant) with Pure Gas Values,
Excluding Outliers
.
1
2
3
4
5
6
Year
Gas Coefficient ($/mcf)
# Obs
Weighted ppmcf from
Pure Gas Transactions
($/mcf)
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
--1.05
1.32
1.34
0.92
0.89
1.00
1.18
0.81
0.90
0.56
0.77
0.76
0.70
0.60
0.90
0.69
0.83
0.73
1.07
0.96
1.20
# Obs
Ratio of Estimated Gas
Coefficient to Pure
Transaction ppmcf
0
1
1
4
3
5
9
18
27
18
18
26
31
31
29
26
42
24
26
14
32
21
--0.61
0.65
0.39
1.05
1.15
0.99
0.74
1.11
0.96
1.47
1.13
1.01
0.87
1.14
1.03
0.89
0.82
1.03
1.36
0.91
0.99
--- Insufficient data points.
Source: The Scotia Group M&A Database, January 2004
Note: The pure gas value observations are weighted volumetrically by the cubic feet in each transaction for a
given year. This is equivalent to summing the value of all pure transactions in a given year and dividing by the
total volumes of gas reserves sold.
Table C-2: Regression Results for Transactions with Information on Reserve Status (No Constant),
Excluding Outliers
.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Oil ($/bbl)
Natural Gas ($/mcf)
Year
a1
t-stat
a2
t-stat
a1
t-stat
a2
t-stat
Adj.
R2
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
7.13
5.84
3.50
-3.28
6.94
4.44
5.50
5.15
4.58
4.33
4.18
3.57
3.14
3.93
4.01
3.56
1.81
3.79
6.02
5.43
5.55
8.37
4.02
0.10
4.72
-0.04
1.07
1.06
41.66
2.94
1.33
18.84
10.23
12.15
12.81
28.77
14.34
4.45
5.21
8.19
3.10
7.72
9.19
11.55
---2.47
3.47
12.46
-1.82
-0.68
2.76
-0.02
-0.96
0.47
0.08
-0.57
-0.64
-1.20
-1.58
1.86
3.01
-0.56
-3.32
-0.34
0.23
-3.89
---0.04
4.71
0.16
-0.28
-0.16
6.28
-0.01
-0.28
1.09
0.13
-0.97
-1.38
-2.63
-2.53
2.09
5.00
-0.30
-1.48
-0.27
0.34
-1.38
0.36
0.64
2.05
1.38
1.19
0.80
1.02
1.02
0.82
0.79
0.78
0.81
0.79
0.66
0.74
0.90
0.80
0.58
0.77
1.38
1.06
1.24
1.54
25.51
0.47
2.51
3.85
3.83
46.41
16.29
14.41
7.22
9.34
29.57
24.20
22.35
16.77
11.46
13.77
13.11
11.06
14.71
9.48
29.31
-----0.94
-1.05
-0.24
0.33
-0.25
-0.50
0.10
0.08
0.11
0.19
-0.26
-0.07
-0.15
0.07
-0.27
0.25
-0.10
0.22
-0.21
-0.29
-----0.22
-1.76
-0.76
1.42
-5.45
-4.62
1.49
0.70
0.90
3.91
-2.38
-1.76
-1.83
0.70
-3.85
3.50
-0.83
1.25
-1.77
-2.69
0.72
0.99
0.99
0.89
0.99
0.92
0.99
0.85
0.94
0.96
0.89
0.95
0.91
0.95
0.87
0.93
0.87
0.90
0.74
0.97
0.95
0.97
--- Insufficient data points.
Note: Reserve status - whether reserves are on production or not.
Equation Specification:
adjprice = [ a1o + a2o Do ]Ro + [ a1g + a2g Dg ]Rg
where:
adjprice is transaction price (after elimination of non reserve assets)
the 'o' superscript denotes oil
the 'g' superscript denotes gas
a1 and a2 are the two coefficients for each reserve being tested
R denotes reserves sold
D denotes dummy variable for reserves on production
No. of
No. of
Obs: No. of Obs:
No Oil Obs:
No
Total or Gas No Oil Gas
Obs
Prod Prod Prod
13
21
31
34
25
49
64
99
151
94
86
115
92
114
94
67
83
57
66
46
49
36
13
20
31
32
24
41
55
85
142
80
57
74
53
78
57
46
46
26
29
18
27
29
13
20
31
32
24
41
55
87
146
81
63
84
63
90
67
53
68
43
50
31
47
28
13
21
33
32
25
44
56
89
149
89
67
81
55
85
63
53
54
30
34
25
36
11
Table C-3: Regression Results for Transactions with Information on R/P Ratios (No Constant), Excluding
Outliers
.
1
2
3
4
5
6
7
8
9
10
11
Oil ($/bbl)
Natural Gas ($/mcf)
Adjusted
Obs
Year
a1
t-stat
a2
t-stat
a1
t-stat
a2
t-stat
R2
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
--------------11.00
4.95
--3.81
3.85
2.31
5.00
4.55
5.00
5.68
4.71
11.53
5.19
10.33
9.44
--------------3.35
2.57
--4.40
10.11
3.44
7.57
11.16
5.35
8.14
2.30
3.15
3.05
7.96
4.12
---------------1.64
-0.39
--0.07
-0.06
0.22
-0.29
-0.01
-0.29
-0.29
-0.16
-0.66
-0.07
-0.99
-0.51
---------------2.00
-0.61
--0.33
-1.15
1.43
-1.66
-2.95
-1.73
-5.62
-0.46
-1.44
-0.22
-3.75
-0.54
--------------0.80
1.08
--1.05
1.21
1.08
0.72
0.86
0.93
1.06
0.58
0.95
2.20
1.45
1.23
--------------4.30
24.70
--7.29
20.16
7.16
8.49
5.72
25.56
13.96
3.20
10.68
11.66
8.31
26.97
--------------0.03
-0.04
---0.08
-0.09
-0.07
-0.01
-0.02
0.00
-0.04
0.00
-0.03
-0.16
-0.08
0.00
--- Insufficient data points.
R/P ratio is the ratio of remaining reserves to annual production.
Equation Specification:
adjprice= [a1o + a 2o H o ]Ro + [a1g + a 2g H g ]R g
where:
adjprice is transaction price (after elimination of non reserve assets)
the 'o' superscript denotes oil
the 'g' superscript denotes gas
a1 and a2 are the two coefficients for each reserve being tested
R denotes reserves sold
H denotes the R/P ratio
--------------1.17
-6.22
---2.37
-7.22
-1.97
-0.77
-0.91
-0.28
-2.97
-0.03
-2.92
-5.21
-2.44
0.21
--------------0.97
0.99
--0.93
0.97
0.93
0.97
0.89
0.98
0.95
0.86
0.88
0.96
0.97
0.97
--------------17
14
--32
46
42
42
41
24
42
32
37
28
27
29
Table C-4: Oil and Natural Gas Reserve and Field Prices
.
1
2
3
Oil ($/bbl)
4
5
6
Natural Gas ($/mcf)
Year
Field Price
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
28.52
26.19
25.88
24.09
12.51
15.40
12.58
15.86
20.03
16.54
15.99
14.25
13.19
14.62
18.46
17.23
10.87
15.56
26.72
21.84
22.51
27.56
Reserve Price
Ratio
3/2
Field Price
Reserve Price
Ratio
6/5
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
0.250
0.129
0.268
0.321
0.408
0.286
0.452
0.291
0.182
0.268
0.259
0.248
0.220
0.261
0.199
0.291
0.262
0.231
0.133
0.263
0.255
0.296
2.46
2.59
2.66
2.51
1.94
1.67
1.69
1.69
1.71
1.64
1.74
2.04
1.85
1.55
2.17
2.32
1.96
2.19
3.69
4.12
2.95
4.98
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
0.145
0.248
0.325
0.208
0.497
0.613
0.583
0.519
0.526
0.530
0.473
0.428
0.415
0.390
0.317
0.401
0.315
0.308
0.203
0.352
0.298
0.239
Sources:
Cols 2, 5 EIA/DOE "Monthly Energy Review" November 2004
Cols 3, 6 Table B2-a
7
Table C-5: Regression Results: Reserve Prices and Field Prices
Reserve Prices Against Field Prices
.
2
3
4
5
Constant
t-stat
Coeff
t-stat
1
6
Adj. R 2
7
Obs
Oil Contemporary Price ($/bbl)
Gas Contempory Price ($/mcf)
1.75
0.57
1.73
4.26
0.16
0.11
3.13
2.03
0.30
0.13
22
22
Oil 1 Period Lag Price ($/bbl)
Gas 1 Period Lag Price ($/mcf)
1.74
0.59
1.69
3.80
0.16
0.12
2.98
1.80
0.28
0.10
21
21
Oil 2 Period Lag Price ($/bbl)
Gas 2 Period Lag Price ($/mcf)
1.78
0.69
1.73
4.22
0.16
0.08
3.01
1.09
0.30
0.01
20
20
Reserve Prices Against First Differences in Field Prices
Oil Contemporary Price ($/bbl)
Gas Contempory Price ($/mcf)
4.69
0.84
13.93
18.12
-0.02
0.08
-0.29
1.16
-0.05
0.02
21
21
Oil 1 Period Lag Price ($/bbl)
Gas 1 Period Lag Price ($/mcf)
4.77
0.86
13.76
18.21
0.03
0.09
0.46
0.99
-0.04
0.00
20
20
Oil 2 Period Lag Price ($/bbl)
Gas 2 Period Lag Price ($/mcf)
4.64
0.86
13.42
16.56
-0.02
-0.01
-0.31
-0.12
-0.05
-0.06
19
19
1
2
Year
P/R
Ratio
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.10
0.11
0.11
0.11
0.10
0.11
0.10
0.10
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.08
Table D-1: Estimates of Hotelling Values and Price Expectations, Oil
.
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
Adjusted Price (b)
Price
$/bbl
Price
$/bbl
$/bbl
$/bbl
$/bbl
Ratio (a)
0.09
0.10
0.10
0.10
0.09
0.10
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.08
0.08
0.08
0.08
0.09
0.08
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
0.78
0.08
0.04
4.66
0.77
0.68
0.25
1.30
0.40
0.36
0.60
0.24
0.67
0.23
0.92
0.35
0.90
0.57
1.81
0.97
0.56
0.46
9.98
9.17
9.06
8.43
4.38
5.39
4.40
5.55
7.01
5.79
5.60
4.99
4.62
5.12
6.46
6.03
3.80
5.45
9.35
7.64
7.88
9.65
28.52
26.19
25.88
24.09
12.51
15.40
12.58
15.86
20.03
16.54
15.99
14.25
13.19
14.62
18.46
17.23
10.87
15.56
26.72
21.84
22.51
27.56
0.12
-0.17
0.11
0.11
0.10
0.05
0.14
0.06
-0.05
0.03
0.01
-0.03
-0.03
0.00
-0.07
0.02
-0.01
-0.04
-0.19
-0.02
-0.04
0.00
18.54
17.02
16.82
15.66
8.13
10.01
8.18
10.31
13.02
10.75
10.39
9.26
8.57
9.50
12.00
11.20
7.07
10.11
17.37
14.20
14.63
17.91
Note: A value of 0.00 implies negligible growth rates.
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2a, Col 3.
Regression Results.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-4.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread: Standard Deviations, [Column (9) - Column (4)] / Column (5).
2.60
5.05
2.42
2.02
1.59
2.27
1.44
2.23
3.58
2.42
2.51
2.62
2.96
2.49
3.27
2.24
2.48
2.82
4.89
2.47
2.55
2.19
11
HV
Spread
SDs
14.7
161.4
252.1
1.7
4.0
8.3
10.0
4.4
23.4
17.6
10.5
24.3
8.5
25.2
9.0
17.6
4.7
11.5
7.6
8.7
15.8
21.2
Year
Table D-2: Estimates of Hotelling Values and Price Expectations, Pure Oil
.
2
3
4
5
6
7
8.00
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
$/bbl
Price
$/bbl
$/bbl
$/bbl
$/bbl
Ratio
Ratio (a)
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.10
0.11
0.11
0.11
0.10
0.11
0.10
0.10
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.08
1
0.09
0.10
0.10
0.10
0.09
0.10
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.08
0.08
0.08
0.08
0.09
0.08
7.11
10.15
6.94
3.39
8.86
3.56
6.15
4.72
4.22
4.66
3.46
3.70
3.71
3.63
3.84
4.81
3.34
4.22
3.46
3.88
5.19
6.41
--3.38
0.47
2.24
1.95
2.03
1.62
1.50
1.71
1.89
1.59
2.01
2.93
1.45
2.09
2.60
1.87
1.71
2.26
0.31
2.08
1.55
9.98
9.17
9.06
8.43
4.38
5.39
4.40
5.55
7.01
5.79
5.60
4.99
4.62
5.12
6.46
6.03
3.80
5.45
9.35
7.64
7.88
9.65
28.52
26.19
25.88
24.09
12.51
15.40
12.58
15.86
20.03
16.54
15.99
14.25
13.19
14.62
18.46
17.23
10.87
15.56
26.72
21.84
22.51
27.56
0.12
0.16
0.11
-0.13
0.16
-0.01
0.15
0.07
-0.01
0.04
-0.04
-0.02
0.02
-0.01
-0.06
0.01
0.02
0.00
-0.20
-0.11
-0.06
-0.04
18.54
17.02
16.82
15.66
8.13
10.01
8.18
10.31
13.02
10.75
10.39
9.26
8.57
9.50
12.00
11.20
7.07
10.11
17.37
14.20
14.63
17.91
--- Insufficient data points.
Note: A value of 0.00 implies negligible growth rates.
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2e, Col 4.
Statistical Results.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-4.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread: Standard Deviations, [Column (9) - Column (4)] / Column (5).
2.61
1.68
2.43
4.62
0.92
2.81
1.33
2.19
3.08
2.31
3.01
2.50
2.31
2.62
3.12
2.33
2.11
2.40
5.02
3.66
2.82
2.79
11
HV
Spread
SDs
--2.0
21.0
5.5
-0.4
3.2
1.3
3.7
5.2
3.2
4.4
2.8
1.7
4.1
3.9
2.5
2.0
3.4
6.1
33.8
4.5
7.4
Year
Table D-3: Estimates of Hotelling Values and Price Expectations, Natural Gas
.
2
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
$/mcf
Price
$/mcf
$/mcf
$/mcf
Ratio
Ratio (a) $/mcf
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.09
0.08
0.09
0.08
0.08
0.08
0.09
0.10
0.10
0.10
0.10
0.11
0.11
0.11
0.11
0.12
0.11
0.12
0.11
0.11
0.11
0.10
1
0.08
0.07
0.08
0.07
0.07
0.08
0.08
0.09
0.09
0.09
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
0.28
0.01
0.00
0.50
0.05
0.15
0.03
0.15
0.06
0.03
0.07
0.06
0.04
0.06
0.04
0.06
0.10
0.09
0.12
0.16
0.09
0.06
0.86
0.91
0.93
0.88
0.68
0.58
0.59
0.59
0.60
0.57
0.61
0.71
0.65
0.54
0.76
0.81
0.69
0.77
1.29
1.44
1.03
1.74
2.46
2.59
2.66
2.51
1.94
1.67
1.69
1.69
1.71
1.64
1.74
2.04
1.85
1.55
2.17
2.32
1.96
2.19
3.69
4.12
2.95
4.98
-0.02
0.10
0.17
0.05
0.13
0.16
0.17
0.15
0.15
0.14
0.11
0.07
0.08
0.07
0.02
0.06
0.00
0.00
-0.10
0.02
-0.02
-0.07
1.60
1.68
1.73
1.63
1.26
1.09
1.10
1.10
1.11
1.07
1.13
1.33
1.20
1.01
1.41
1.51
1.27
1.42
2.40
2.68
1.92
3.24
Note: A value of 0.00 implies negligible growth rates.
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2a, Col 5.
Regression Results.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-4.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread: Standard Deviations, [Column (9) - Column (4)] / Column (5).
4.48
2.62
2.00
3.12
1.31
1.06
1.11
1.25
1.24
1.23
1.37
1.52
1.57
1.67
2.05
1.62
2.06
2.11
3.21
1.84
2.18
2.72
11
HV
Spread
SDs
4.4
95.5
173.7
2.2
6.3
0.4
3.8
1.5
3.7
6.7
4.3
7.0
11.1
6.6
18.7
9.6
6.7
8.2
13.6
7.5
11.5
31.9
Year
Table D-4: Estimates of Hotelling Values and Price Expectations, Pure Natural Gas
.
2
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
Price
$/mcf
$/mcf
$/mcf
$/mcf
Ratio
Ratio (a) $/mcf
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.09
0.08
0.09
0.08
0.08
0.08
0.09
0.10
0.10
0.10
0.10
0.11
0.11
0.11
0.11
0.12
0.11
0.12
0.11
0.11
0.11
0.10
1
0.08
0.07
0.08
0.07
0.07
0.08
0.08
0.09
0.09
0.09
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
--1.05
1.32
1.34
0.92
0.89
1.00
1.18
0.81
0.90
0.56
0.77
0.76
0.70
0.60
0.90
0.69
0.83
0.73
1.07
0.96
1.20
------11.01
0.18
0.34
0.27
0.59
0.29
0.35
0.21
0.28
0.34
0.24
0.17
0.33
0.29
0.60
0.48
0.09
0.51
0.28
0.86
0.91
0.93
0.88
0.68
0.58
0.59
0.59
0.60
0.57
0.61
0.71
0.65
0.54
0.76
0.81
0.69
0.77
1.29
1.44
1.03
1.74
2.46
2.59
2.66
2.51
1.94
1.67
1.69
1.69
1.71
1.64
1.74
2.04
1.85
1.55
2.17
2.32
1.96
2.19
3.69
4.12
2.95
4.98
--0.18
0.23
0.20
0.13
0.15
0.17
0.18
0.14
0.14
0.04
0.05
0.08
0.09
-0.01
0.06
0.02
0.04
-0.11
-0.05
-0.01
-0.07
1.60
1.68
1.73
1.63
1.26
1.09
1.10
1.10
1.11
1.07
1.13
1.33
1.20
1.01
1.41
1.51
1.27
1.42
2.40
2.68
1.92
3.24
--- Insufficient data points.
Note: A value of 0.00 implies negligible growth rates.
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2f, Col 4.
Statistical Results.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-4.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread: Standard Deviations, [Column (9) - Column (4)] / Column (5).
--1.61
1.31
1.22
1.37
1.22
1.10
0.93
1.37
1.18
2.02
1.71
1.58
1.45
2.35
1.68
1.85
1.72
3.29
2.51
1.99
2.70
11
HV
Spread
SDs
------0.0
1.9
0.6
0.4
-0.1
1.0
0.5
2.7
2.0
1.3
1.3
4.6
1.8
2.0
1.0
3.5
17.8
1.9
7.3
Table D-5: Confidence Limits for Implicit Growth Rate of Oil Prices
1
2
3
4
Year
Implicit Annual
Growth Rate in
Price (g)
Lower Bound
Upper Bound
Lower Bound
Upper Bound
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.12
-0.17
0.11
0.11
0.10
0.05
0.14
0.06
-0.05
0.03
0.01
-0.03
-0.03
0.00
-0.07
0.02
-0.01
-0.04
-0.19
-0.02
-0.04
0.00
0.05
-0.20
0.11
-2.42
0.03
-0.05
0.12
-0.19
-0.14
-0.01
-0.09
-1.29
-0.26
-0.03
-0.36
-0.01
-0.36
-0.15
-2.29
-0.12
-0.09
-0.02
0.16
-0.15
0.11
0.22
0.13
0.10
0.15
0.13
0.01
0.06
0.06
0.00
0.05
0.02
0.03
0.04
0.06
0.02
0.01
0.03
0.00
0.02
0.06
-0.19
0.11
-0.12
0.05
-0.02
0.12
-0.05
-0.12
0.00
-0.06
-0.06
-0.15
-0.03
-0.21
-0.01
-0.14
-0.12
-0.58
-0.08
-0.08
-0.02
0.17
-0.14
0.11
0.35
0.14
0.11
0.15
0.17
0.02
0.07
0.07
0.00
0.09
0.03
0.07
0.05
0.11
0.04
0.21
0.05
0.00
0.02
Variance of V Method
Note: A value of 0.00 implies negligible growth rates.
Sources:
(2)
(3)
(4)
(5)
(6)
Implicit Annual Growth Rate in Price, Table D-1, Col 8.
See text.
See text.
See text.
See text.
The Scotia Group M&A Database, January 2004
5
6
Delta Method
Table D-6: Confidence Limits for Implicit Growth Rate of Natural Gas Prices
1
2
3
4
Year
Implicit Annual
Growth Rate in
Price (g)
Lower Bound
Upper Bound
Lower Bound
Upper Bound
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
-0.02
0.10
0.17
0.05
0.13
0.16
0.17
0.15
0.15
0.14
0.11
0.07
0.08
0.07
0.02
0.06
0.00
0.00
-0.10
0.02
-0.02
-0.07
-0.93
0.10
0.17
-0.93
0.12
0.13
0.16
0.09
0.13
0.13
0.08
0.04
0.07
0.03
0.00
0.04
-0.10
-0.08
-0.26
-0.04
-0.08
-0.10
0.20
0.11
0.17
0.21
0.14
0.18
0.17
0.18
0.16
0.14
0.12
0.09
0.10
0.09
0.04
0.08
0.05
0.05
-0.02
0.05
0.01
-0.04
-0.58
0.10
0.17
-0.39
0.12
0.14
0.16
0.11
0.13
0.13
0.08
0.05
0.07
0.03
0.00
0.04
-0.07
-0.06
-0.21
-0.02
-0.07
-0.10
0.55
0.11
0.17
0.50
0.14
0.19
0.17
0.19
0.16
0.14
0.13
0.09
0.10
0.10
0.05
0.09
0.06
0.06
0.00
0.06
0.02
-0.04
Variance of V Method
Note: A value of 0.00 implies negligible growth rates.
Sources:
(2)
(3)
(4)
(5)
(6)
Implicit Annual Growth Rate in Price, Table D-3, Col 8.
See text.
See text.
See text.
See text.
The Scotia Group M&A Database, January 2004
5
6
Delta Method
Table D-7: Return to Holding Oil and Natural Gas, 1982-2003
1
2
3
4
Year
Riskless
Rate
(1-yr TB)
Oil Value
($/bbl)
Return to
Holding
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.096
0.109
0.084
0.065
0.068
0.077
0.085
0.079
0.059
0.039
0.034
0.053
0.059
0.055
0.056
0.051
0.051
0.061
0.035
0.020
0.012
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
-0.527
1.061
0.114
-0.341
-0.136
0.292
-0.189
-0.211
0.219
-0.067
-0.145
-0.180
0.315
-0.036
0.362
-0.431
0.260
-0.010
0.618
-0.001
0.424
-0.623
0.952
0.030
-0.406
-0.204
0.215
-0.274
-0.290
0.160
-0.106
-0.179
-0.234
0.255
-0.091
0.306
-0.482
0.209
-0.071
0.584
-0.021
0.412
Mean
St.Dev.
St.Err.
Mn/Se
0.059
0.022
0.005
12.099
0.048
0.373
0.083
0.578
-0.014
0.371
0.083
-0.163
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
5
6
Oil Achieved
Risk
Gas Value
Premium
($/mcf)
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
7
Return to
Holding
8
Natural Gas
Achieved
Risk
Premium
9
Required
Risk
Premium
0.800
0.345
-0.395
0.843
0.062
-0.038
-0.111
0.026
-0.033
-0.054
0.060
-0.121
-0.213
0.138
0.356
-0.337
0.092
0.110
0.940
-0.395
0.354
0.704
0.236
-0.479
0.779
-0.005
-0.114
-0.196
-0.053
-0.092
-0.093
0.026
-0.174
-0.272
0.082
0.300
-0.388
0.041
0.049
0.905
-0.415
0.342
0.111
0.125
0.106
0.077
0.084
0.089
0.085
0.086
0.079
0.070
0.059
0.071
0.066
0.064
0.064
0.053
0.057
0.060
0.050
0.046
0.040
0.104
0.385
0.086
1.206
0.042
0.382
0.085
0.493
0.073
0.021
0.005
15.622
Federal Reserve Board Historical Rates (http://www.federalreserve.gov/releases/h15/data/a/tcm1y.txt)
Oil Reserve Price, Table B-2a, Col 3.
Percentage Change, Col 3 (t)/Col 3 (t-1) - 1
Oil Achieved Risk Premium, Col 4 - Col 2
Natural Gas Reserve Price, Table B-2a, Col 5.
Percentage Change, Col 8 (t)/Col 8 (t-1) - 1
Natural Gas Achieved Risk Premium, Col 8 - Col 2
Required Risk Premium, LTBR (http://www.federalreserve.gov/releases/h15/data/a/tcm10y.txt)
Table D-8: Levelized Oil Wellhead Prices
1
3
4
Year
2
Required
Risk
Premium
P/R
Ratio
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
13.01
11.10
12.46
10.62
7.67
8.39
8.85
8.49
8.55
7.86
7.01
5.87
7.09
6.57
6.44
6.35
5.26
5.65
6.03
5.02
4.61
4.01
0.10
0.11
0.11
0.11
0.10
0.11
0.10
0.10
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.08
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
R/Q
Ratio
5
Reserve
Price
$/bbl
6
Decline
Rate (a)
9.97
9.22
9.13
9.32
9.56
9.36
9.70
10.37
10.58
10.45
10.09
10.15
10.12
10.15
10.29
10.30
11.32
10.78
11.58
11.51
10.66
12.08
7.13
3.37
6.95
7.74
5.10
4.40
5.69
4.61
3.64
4.44
4.14
3.54
2.90
3.81
3.67
5.01
2.85
3.59
3.55
5.75
5.74
8.17
0.09
0.10
0.10
0.10
0.09
0.10
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.08
0.08
0.08
0.08
0.09
0.08
7
8
9
Operating Levelized
Discount Cost (c) Wellhead
Rate
$/bbl
Price
0.26
0.22
0.25
0.21
0.15
0.17
0.18
0.17
0.17
0.16
0.14
0.12
0.14
0.13
0.13
0.13
0.11
0.11
0.12
0.10
0.09
0.08
9.98
9.17
9.06
8.43
4.38
5.39
4.40
5.55
7.01
5.79
5.60
4.99
4.62
5.12
6.46
6.03
3.80
5.45
9.35
7.64
7.88
9.65
34.92
19.08
31.06
30.66
16.42
16.24
19.27
17.85
16.89
17.09
15.18
12.39
11.39
13.64
14.65
17.10
9.79
13.07
17.55
19.53
18.72
25.06
Required Risk Premium, http://www.federalreserve.gov/releases/h15/data/a/tcm10y.txt.
Production/Reserves Ratio, P/R, Table D-1, Col 2.
Reserves/Initial Output Ratio, [ Column (3) ] ^-1.
Reserve Price (b), Table D-1, Col 4.
Adjusted Ratio (a), Table D-1, Col 3.
Discount Rate, 0.02*Column (2).
Operating Cost (c), Table D-1, Col 6.
Levelized Wellhead Price, {Col (4) * Col (5) * [ Col (6) + Col (7) ]} + Col (8).
Table D-9: Levelized Gas Wellhead Prices
1
3
4
Year
2
Required
Risk
Premium
P/R
Ratio
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
13.01
11.10
12.46
10.62
7.67
8.39
8.85
8.49
8.55
7.86
7.01
5.87
7.09
6.57
6.44
6.35
5.26
5.65
6.03
5.02
4.61
4.01
0.09
0.08
0.09
0.08
0.08
0.08
0.09
0.10
0.10
0.10
0.10
0.11
0.11
0.11
0.11
0.12
0.11
0.12
0.11
0.11
0.11
0.10
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
R/Q
Ratio
5
Reserve
Price
$/bbl
6
Decline
Rate (a)
11.52
12.76
11.65
12.35
12.39
11.89
11.23
9.89
9.70
9.84
9.59
9.28
8.86
9.12
8.76
8.67
8.93
8.67
8.71
8.97
9.01
9.62
0.36
0.64
0.86
0.52
0.96
1.02
0.99
0.88
0.90
0.87
0.82
0.87
0.77
0.60
0.69
0.93
0.62
0.67
0.75
1.45
0.88
1.19
0.08
0.07
0.08
0.07
0.07
0.08
0.08
0.09
0.09
0.09
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
7
8
9
Operating Levelized
Discount Cost (c) Wellhead
Rate
$/bbl
Price
0.26
0.22
0.25
0.21
0.15
0.17
0.18
0.17
0.17
0.16
0.14
0.12
0.14
0.13
0.13
0.13
0.11
0.11
0.12
0.10
0.09
0.08
0.86
0.91
0.93
0.88
0.68
0.58
0.59
0.59
0.60
0.57
0.61
0.71
0.65
0.54
0.76
0.81
0.69
0.77
1.29
1.44
1.03
1.74
2.26
3.32
4.23
2.73
3.40
3.57
3.45
2.85
2.90
2.70
2.45
2.44
2.29
1.80
2.14
2.66
1.81
2.02
2.74
4.04
2.54
3.73
Required Risk Premium, http://www.federalreserve.gov/releases/h15/data/a/tcm10y.txt.
Production/Reserves Ratio, P/R, Table D-3, Col 2.
Reserves/Initial Output Ratio, [ Column (3) ] ^-1.
Reserve Price (b), Table D-3, Col 4.
Adjusted Ratio (a), Table D-3, Col 3.
Discount Rate, 0.02*Column (2).
Operating Cost (c), Table D-3, Col 6.
Levelized Wellhead Price, {Col (4) * Col (5) * [ Col (6) + Col (7) ]} + Col (8).
Table D-10:
1
2
Year
Levelized
Price
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
34.92
19.08
31.06
30.66
16.42
16.24
19.27
17.85
16.89
17.09
15.18
12.39
11.39
13.64
14.65
17.10
9.79
13.07
17.55
19.53
18.72
25.06
3
Oil ($/bbl)
4
5
6
Gas ($/mcf)
7
Ratio
Levelized
Price
Field Price
Field Price
Ratio
28.52
26.19
25.88
24.09
12.51
15.40
12.58
15.86
20.03
16.54
15.99
14.25
13.19
14.62
18.46
17.23
10.87
15.56
26.72
21.84
22.51
27.56
1.22
0.73
1.20
1.27
1.31
1.05
1.53
1.13
0.84
1.03
0.95
0.87
0.86
0.93
0.79
0.99
0.90
0.84
0.66
0.89
0.83
0.91
2.26
3.32
4.23
2.73
3.40
3.57
3.45
2.85
2.90
2.70
2.45
2.44
2.29
1.80
2.14
2.66
1.81
2.02
2.74
4.04
2.54
3.73
2.46
2.59
2.66
2.51
1.94
1.67
1.69
1.69
1.71
1.64
1.74
2.04
1.85
1.55
2.17
2.32
1.96
2.19
3.69
4.12
2.95
4.98
0.92
1.28
1.59
1.09
1.75
2.14
2.04
1.69
1.69
1.65
1.41
1.20
1.24
1.16
0.99
1.15
0.93
0.92
0.74
0.98
0.86
0.75
Sources:
(2)
(3)
(4)
(5)
(6)
(7)
Levelized Oil Price, Table D-8, Col 9.
Oil Field Price, Table C-4, Col 2.
Ratio, Col 2 / Col 3
Levelized Gas Price, Table D-9, Col 9.
Gas Field Price, Table C-4, Col 5.
Ratio, Col 5 / Col 6
Figure 5: Levelized Oil Wellhead Prices derived from Reserve Values and Field Prices,
1982-2003
40.00
35.00
30.00
Price ($US/bl)
25.00
20.00
15.00
10.00
5.00
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Oil Levelized Wellhead Price
Oil Field Price
Figure 6: Levelized Wellhead Natural Gas Prices derived from Reserve Values,
and Field Prices, 1982-2003
6.00
5.00
3.00
2.00
1.00
Year
Levelized Wellhead Natural Gas Price
Natural Gas Field Price
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
19
85
19
84
19
83
0.00
19
82
Price ($US/mcf)
4.00
Year
Table D-1a: Estimates of Hotelling Values and Price Expectations, All Oil
.
2
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
$/bbl
Price
$/bbl
$/bbl
$/bbl
$/bbl
Ratio
Ratio (a)
HV
Spread
$/bbl
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.10
0.11
0.11
0.11
0.10
0.11
0.10
0.10
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.08
16.67
163.45
254.14
3.24
5.96
10.25
12.01
6.39
25.37
19.59
12.50
36.93
10.45
27.15
11.02
19.62
6.67
13.48
9.28
10.70
17.80
23.23
1
0.09
0.10
0.10
0.10
0.09
0.10
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.08
0.08
0.08
0.08
0.09
0.08
5.58
3.20
6.87
0.55
3.57
3.04
5.19
2.02
2.84
3.72
2.95
0.55
1.56
3.36
1.83
4.30
1.04
2.45
0.55
3.81
4.61
7.26
0.78
0.08
0.04
4.66
0.77
0.68
0.25
1.30
0.40
0.36
0.60
0.24
0.67
0.23
0.92
0.35
0.90
0.57
1.81
0.97
0.56
0.46
9.98
9.17
9.06
8.43
4.38
5.39
4.40
5.55
7.01
5.79
5.60
4.99
4.62
5.12
6.46
6.03
3.80
5.45
9.35
7.64
7.88
9.65
28.52
26.19
25.88
24.09
12.51
15.40
12.58
15.86
20.03
16.54
15.99
14.25
13.19
14.62
18.46
17.23
10.87
15.56
26.72
21.84
22.51
27.56
Sources:
(2)
(3)
(4)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1e.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2b.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-1a.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread, [Column (9) - Column (4)] / Column (5).
0.05
-0.20
0.11
-2.42
0.03
-0.05
0.12
-0.19
-0.14
-0.01
-0.09
-1.29
-0.26
-0.03
-0.36
-0.01
-0.36
-0.15
-2.29
-0.12
-0.09
-0.02
18.54
17.02
16.82
15.66
8.13
10.01
8.18
10.31
13.02
10.75
10.39
9.26
8.57
9.50
12.00
11.20
7.07
10.11
17.37
14.20
14.63
17.91
3.32
5.32
2.45
28.47
2.28
3.29
1.58
5.10
4.59
2.89
3.53
16.84
5.51
2.83
6.56
2.60
6.80
4.13
31.58
3.73
3.17
2.47
11
Year
Table D-1a: Estimates of Hotelling Values and Price Expectations, All Oil
.
2
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
$/bbl
Price
$/bbl
$/bbl
$/bbl
$/bbl
Ratio
Ratio (a)
HV
Spread
$/bbl
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.10
0.11
0.11
0.11
0.10
0.11
0.10
0.10
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.08
12.67
159.45
250.14
-0.30
1.96
6.25
8.01
2.39
21.37
15.59
8.50
22.27
6.45
23.15
7.02
15.62
2.67
9.48
5.63
6.70
13.80
19.23
1
0.09
0.10
0.10
0.10
0.09
0.10
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.08
0.08
0.08
0.08
0.09
0.08
8.69
3.54
7.03
17.06
6.63
5.76
6.19
7.21
4.44
5.15
5.33
4.01
4.24
4.26
5.52
5.71
4.66
4.72
7.17
7.69
6.87
9.09
0.78
0.08
0.04
4.66
0.77
0.68
0.25
1.30
0.40
0.36
0.60
0.24
0.67
0.23
0.92
0.35
0.90
0.57
1.81
0.97
0.56
0.46
9.98
9.17
9.06
8.43
4.38
5.39
4.40
5.55
7.01
5.79
5.60
4.99
4.62
5.12
6.46
6.03
3.80
5.45
9.35
7.64
7.88
9.65
28.52
26.19
25.88
24.09
12.51
15.40
12.58
15.86
20.03
16.54
15.99
14.25
13.19
14.62
18.46
17.23
10.87
15.56
26.72
21.84
22.51
27.56
Sources:
(2)
(3)
(4)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1e.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2b.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-1a.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread, [Column (9) - Column (4)] / Column (5).
0.16
-0.15
0.11
0.22
0.13
0.10
0.15
0.13
0.01
0.06
0.06
0.00
0.05
0.02
0.03
0.04
0.06
0.02
0.01
0.03
0.00
0.02
18.54
17.02
16.82
15.66
8.13
10.01
8.18
10.31
13.02
10.75
10.39
9.26
8.57
9.50
12.00
11.20
7.07
10.11
17.37
14.20
14.63
17.91
2.13
4.81
2.39
0.92
1.23
1.74
1.32
1.43
2.93
2.09
1.95
2.31
2.02
2.23
2.17
1.96
1.52
2.14
2.42
1.85
2.13
1.97
11
Year
Table D-1c: Estimates of Hotelling Values and Price Expectations, All Gas
.
2
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
$/mcf
Price
$/mcf
$/mcf
$/mcf
Ratio
Ratio (a) $/mcf
HV
Spread
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.09
0.08
0.09
0.08
0.08
0.08
0.09
0.10
0.10
0.10
0.10
0.11
0.11
0.11
0.11
0.12
0.11
0.12
0.11
0.11
0.11
0.10
5.29
97.49
175.68
3.07
8.34
2.41
5.77
3.46
5.68
8.70
6.29
9.00
13.12
8.64
20.71
11.61
8.74
10.22
15.61
9.53
13.46
33.87
1
0.08
0.07
0.08
0.07
0.07
0.08
0.08
0.09
0.09
0.09
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.10
0.62
0.85
0.10
0.87
0.73
0.93
0.57
0.78
0.81
0.68
0.74
0.69
0.48
0.61
0.81
0.42
0.49
0.51
1.13
0.70
1.06
0.28
0.01
0.00
0.50
0.05
0.15
0.03
0.15
0.06
0.03
0.07
0.06
0.04
0.06
0.04
0.06
0.10
0.09
0.12
0.16
0.09
0.06
0.86
0.91
0.93
0.88
0.68
0.58
0.59
0.59
0.60
0.57
0.61
0.71
0.65
0.54
0.76
0.81
0.69
0.77
1.29
1.44
1.03
1.74
2.46
2.59
2.66
2.51
1.94
1.67
1.69
1.69
1.71
1.64
1.74
2.04
1.85
1.55
2.17
2.32
1.96
2.19
3.69
4.12
2.95
4.98
Sources:
(2)
(3)
(4)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1e.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2b.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-1a.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread, [Column (9) - Column (4)] / Column (5).
-0.93
0.10
0.17
-0.93
0.12
0.13
0.16
0.09
0.13
0.13
0.08
0.04
0.07
0.03
0.00
0.04
-0.10
-0.08
-0.26
-0.04
-0.08
-0.10
1.60
1.68
1.73
1.63
1.26
1.09
1.10
1.10
1.11
1.07
1.13
1.33
1.20
1.01
1.41
1.51
1.27
1.42
2.40
2.68
1.92
3.24
15.99
2.71
2.02
16.32
1.45
1.49
1.19
1.92
1.42
1.31
1.67
1.79
1.75
2.09
2.31
1.86
3.02
2.90
4.74
2.38
2.75
3.05
11
Year
Table D-1c: Estimates of Hotelling Values and Price Expectations, All Gas
.
2
3
4
5
6
7
8
9
10
Implicit
Annual
Ratio of
SE of
Growth Net Field HV to
Reserve Reserve Operating
Field
Price
Cost (c) Price (p) Rate in Price: HV Reserve
P/R
Adjusted Price (b)
Price
$/mcf
Price
$/mcf
$/mcf
$/mcf
Ratio
Ratio (a) $/mcf
HV
Spread
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0.09
0.08
0.09
0.08
0.08
0.08
0.09
0.10
0.10
0.10
0.10
0.11
0.11
0.11
0.11
0.12
0.11
0.12
0.11
0.11
0.11
0.10
2.39
93.49
171.68
0.22
4.34
-1.59
1.77
-0.54
1.68
4.70
2.29
5.00
9.12
4.64
16.71
7.61
4.74
6.22
11.61
5.53
9.46
29.87
1
0.08
0.07
0.08
0.07
0.07
0.08
0.08
0.09
0.09
0.09
0.09
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.09
0.92
0.66
0.87
1.52
1.06
1.32
1.05
1.18
1.01
0.93
0.97
1.00
0.85
0.73
0.76
1.05
0.81
0.86
0.99
1.78
1.06
1.32
0.28
0.01
0.00
0.50
0.05
0.15
0.03
0.15
0.06
0.03
0.07
0.06
0.04
0.06
0.04
0.06
0.10
0.09
0.12
0.16
0.09
0.06
0.86
0.91
0.93
0.88
0.68
0.58
0.59
0.59
0.60
0.57
0.61
0.71
0.65
0.54
0.76
0.81
0.69
0.77
1.29
1.44
1.03
1.74
2.46
2.59
2.66
2.51
1.94
1.67
1.69
1.69
1.71
1.64
1.74
2.04
1.85
1.55
2.17
2.32
1.96
2.19
3.69
4.12
2.95
4.98
Sources:
(2)
(3)
(4)
(6)
(7)
(8)
(9)
(10)
(11)
Production/Reserves Ratio, P/R, Table C-1e.
Adjusted Ratio (a), see text.
Reserve Price (b), Table B-2b.
Operating Cost (c), 35% of field price.
Field Price (p), Table C-1a.
Implicit Annual Growth Rate in Price, see text.
Net Field Price, p-c, Column (7) - Column (6).
HV to Reserve Price, Column (9) / Column (4).
HV Spread, [Column (9) - Column (4)] / Column (5).
0.20
0.11
0.17
0.21
0.14
0.18
0.17
0.18
0.16
0.14
0.12
0.09
0.10
0.09
0.04
0.08
0.05
0.05
-0.02
0.05
0.01
-0.04
1.60
1.68
1.73
1.63
1.26
1.09
1.10
1.10
1.11
1.07
1.13
1.33
1.20
1.01
1.41
1.51
1.27
1.42
2.40
2.68
1.92
3.24
1.73
2.53
1.98
1.07
1.19
0.82
1.05
0.93
1.10
1.15
1.17
1.32
1.42
1.39
1.85
1.43
1.57
1.66
2.42
1.51
1.81
2.46
11
Figure 1: Oil Reserve Prices for 1982-2003
12.00
10.00
Reserve Price
8.00
6.00
4.00
2.00
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Oil Reserve Price ($/bbl) - All Transactions
Oil Reserve Price ($/bbl) - Without Outliers
Figure 2: Natural Gas Reserve Prices for 1982-2003
1.60
1.40
1.20
Reserve Price
1.00
0.80
0.60
0.40
0.20
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Natural Gas Reserve Price ($/mcf) - All Transactions
Natural Gas Reserve Price ($/mcf) - Without Outliers
Figure 8: Levelized Oil and Gas Prices
40.00
35.00
30.00
Price
25.00
20.00
15.00
10.00
5.00
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Levelized Oil Price
Levelized Gas Price
Figure 3: Estimates of Hotelling Values and Price Expectations, Oil
20.00
18.00
16.00
Values ($/bbl)
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Oil Hotelling Values ($/bbl)
Oil Reserve Price ($/bbl)
Figure 4: Estimates of Hotelling Values and Price Expectations, Natural Gas
3.50
3.00
Values ($/mcf)
2.50
2.00
1.50
1.00
0.50
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Natural Gas Hotelling Values ($/mcf)
Natural Gas Reserve Price ($/mcf)
Figure 5a: Implicit Annual Growth Rates for Oil Prices, All Transactions
0.50
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Rate (%)
-0.50
-1.00
-1.50
-2.00
-2.50
Year
Oil Implicit Growth Rates
Oil Implicit Growth Rate (Upper Variance of V Estimate)
Oil Implicit Growth Rate (Upper Delta Estimate)
Oil Implicit Growth Rate (Lower Variance of V Estimate)
Oil Implicit Growth Rate (Lower Delta Estimate)
Figure 5b: Implicit Annual Growth Rates for Natural Gas Prices, All Transactions
0.60
0.40
0.20
0.00
Rate (%)
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
-0.20
-0.40
-0.60
-0.80
-1.00
Year
Gas Implicit Growth Rates
Gas Implicit Growth Rate (Upper Variance of V Estimate)
Gas Implicit Growth Rate (Upper Delta Estimate)
Gas Implicit Growth Rate (Lower Variance of V Estimate)
Gas Implicit Growth Rate (Lower Delta Estimate)
Figure 6: Implicit Annual Growth Rate for Oil and Natural Gas Prices, Pure Transactions
0.25
0.20
0.15
0.10
Rate (%)
0.05
0.00
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
-0.05
-0.10
-0.15
-0.20
-0.25
Year
Pure Oil Implicit Growth Rate
Pure Natural Gas Implicit Growth Rate
Figure 7: Returns to Holding Oil and Natural Gas Reserves
1.200
1.000
0.800
0.600
Return (%)
0.400
0.200
0.000
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
-0.200
-0.400
-0.600
-0.800
Year
Achieved Risk Premium for Oil
Achieved Risk Premium for Natural Gas