WHAT DOES A RESERVOIR

ENGINEER DO?November 15, 2011

Reservoir Engineering

What is a reservoir engineer? Works with geologists to determine hydrocarbons in place

OOIP – Original Oil In Place EUR – Estimated Ultimate Recovery

Evaluates development scenarios Uses production models to estimate timing of recovery

Tools of the Trade Data sources – public data, internal assessments, industry studies Software

Aries – used in evaluating decline curves, economics, and reserves Enertia – cost/production reporting Prodview –production tracking PERC – drilling data/reports Drilling Info/PI Dwights – used to access public production data

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Reservoir Engineering Decline Curves/Models

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COG – 1 (producing)

Reservoir Engineering Decline Curves/Models

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Production Model

Reservoir Engineering

Reserves Calculated amount of oil/gas that is expected to be produced

from a well or field Economics are considered Barrel of Oil Equivalent (BOE, MBOE) 1 BO = 6 MCF = 1 BOE

Five reserve categories (RSVCAT)

PDP, PNP, PUD, PROB, POSS RES

Proven Unproven

Most Valued Least Valued

Reserves are calculated with reasonable certainty5

Uncertainty Increases

Reservoir Engineering

Securities and Exchange Commission (SEC) Regulates/standardizes how companies determine reserves Holds companies accountable for proven reserves

Concho’s Internal Reserve Process Mid-year update End of year reserves

Third Party Independent Engineering Review Netherland-Sewell & Associates (TX Assets) Cawley Gillespie & Associates (NM Assets)

Concho 2010 YE Reserves 638.6 MMBOE total reserves (323.5 MMBOE proved)

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Reservoir Engineering

Economic Evaluations Company’s base pricing assumptions updated monthly NYMEX average price used for year end evaluations (SEC req.)

Rate of Return (ROR, IRR) Used to determine the attractiveness of a project Concho aims to invest in projects with > 20% ROR Price sensitivity is considered for 20% ROR

PV-10 (PW-10) Present Value (Worth) of a project discounted at 10% per year

over the project’s life

Cash Flow A detailed summary of the project’s money stream over time

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Reservoir Engineering

Within Concho Asset level reservoir engineers

Work to optimize reservoir performance in a specific area Determine reserves for a specific asset Evaluate project economics

Corporate reservoir engineers Company-wide reserves Exploration outside of core areas Technical support for business development Acquisitions/divestitures

Marbob Bakken Permian packages

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Your Turn!

Questions

Feedback/comments

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