Valuation and Subsurface Geology 809 



Whenever decline curves can be constructed, they should always be 

 used. The solution should be worked out by projecting the curve. The 

 curve should come out in the proximity of the computed estimate — if it 

 does not, another check should be made. If any material-balance equations 

 can be solved, they should always be used- — even though they give data 

 only on the entire field, they often confirm or deny the conclusions. 



The evaluator should always go on the property, physically inspect 

 everything he can see, quiz the ganger who handles the lease, and get the 

 latest production figures he has. In setting up a reserve estimate, the 

 valuator says by implication that he expects the wells to produce for years 

 and years — he must be certain they are not already beginning to fail. 



Conclusion 



Accurate valuation of oil and gas properties now depends entirely on 

 a proper understanding of the conditions existing in the producing reser- 

 voir. Since one cannot go down in the reservoir, as one does in a mine, 

 all conclusions must be based on inference, comparison, and experience. 



Although an understanding of the fundamentals of production en- 

 gineering is needed, it serves only as a background. The geologist who is 

 familiar with all of the producing structures in the trend, and who knows 

 the geologic section in the wildcats is best equipped to analyze the produc- 

 tion data from any one field. There is much more to outguessing Mother 

 Nature than being able to reduce well performance to exact figures, or to 

 analyze an electrical log into precise millivolts and ohms. 



Geology, being a study of the earth itself, involves its students in a 

 consideration of the source of sediments, conditions of deposition, up- and 

 down-dip facies changes, lateral variations in thickness or character of 

 reservoir rocks, and countless other kindred problems of sedimentology. 

 Because of his training in these matters and his continued interest in them, 

 the well-grounded subsurface geologist makes the most reliable evaluator. 



Questions 



1. What is meant by "decline curves" ? 



2. What is the Law of Equal Expectations? 



3. Discuss "proration." 



4. Every engineering valuation of an oil property assumes what? 



5. In figuring reserves what factors must be considered? 



6. What is the significance of the number "7758"? 



7. Analyze and discuss the formula R = 7758 XAxTxPX (l-I) 

 XSXF. 



8. What is the significance of figure 413? 



9. How and why should valuation results be checked? 



10. Are gas reserves figured to atmospheric pressure? 



11. Is the statement "the deeper the well, the greater the shrinkage fac- 

 tor" correct? 



12. What is meant by the "Z factor," "law of capture," and "recovery 

 factor"? 



