SEC Reserves Compliance Checklist

11 Critical Compliance Points for Oil and Gas Operators

1. Reasonable certainty defined
2. Economic producibility established
3. Proved area determination
4. Undeveloped reserves timing
5. Price deck methodology
6. Future development costs
7. Production timeline compliance
8. PUD documentation requirements
9. Third-party evaluation/audit engagement
10. Disclosure alignment
11. Annual reporting deadline

Section 1: Proved Reserves Requirements

Point 1: Reasonable Certainty Definition

Requirement: Proved reserves are those quantities of petroleum which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable from known reservoirs under existing economic conditions, operating methods, and government regulations.

Compliance Check:

•  Reservoir is producible at current economic conditions
•  Engineering and geological data support the estimate
•  Commercial recovery is achievable with existing technology
•  Documentation exists for all key assumptions

Pro Tip: “Reasonable certainty” does not require absolute certainty.  Use deterministic or probabilistic methods and apply consistently.

Point 2: Economic Producibility Established

Requirement: Reserves must be economically producible, including having the right to produce, at the time of reporting.

Compliance Check:

•  Economic analysis uses SEC-compliant pricing (12-month average)
•  Operating costs are based on actual or realistic projections
•  Transportation and processing arrangements are documented
•  NPV calculation uses 10% discount rate

Point 3: Proved Area Determination

Requirement: Proved reserves are limited to those areas within the known reservoir productive area.

Compliance Check:

•  Well log and test data confirm reservoir limits
•  Structural and stratigraphic interpretations are documented
•  Offset well performance supports continuity
•  Probabilistic methods used where appropriate for large reservoirs

Pro Tip: Using multiple lines of evidence increases stakeholder confidence

Point 4: Undeveloped Reserves Timing

Requirement: Proved undeveloped reserves (PUDs) must be scheduled to be developed within 5 years unless circumstances can be proven to be justified and warrant longer timelines.

Compliance Check:

•  Development plan has specific timing for each PUD location
•  Capital budget allocation matches development schedule
•  Technical plan exists for each PUD location
• Exceptions beyond 5 years are documented with justification (acceptable exceptions are rare onshore)

SECTION 2: ECONOMIC & PRICING REQUIREMENTS

Point 5: Price Deck Methodology

Requirement: SEC pricing is based on the 12-month average of the first-day-of-the-month prices.

Compliance Check:

•  Prices obtained from valid market sources
•  Appropriate differential adjustments for quality/location applied
•  Prices held constant for economic evaluations (no future escalation)
•  Price effective dates documented

Pro Tip: Benchmark prices can be found at wrightandcompany.com/product-prices.

Point 6: Future Development Costs

Requirement: Costs must be based on reasonable, documented estimates consistent with company’s historical costs or industry benchmarks.

Compliance Check:

•  Drilling and completion costs are current (within 12 months)
•  Relevant facilities and infrastructure costs are documented
•  Abandonment and restoration costs included where required
•  Costs are consistent with company’s actual expenditures or valid benchmarks

Pro Tip: Valid contracts should take precedence over historical 12-month average costs. 

SECTION 3: TECHNICAL & OPERATIONAL REQUIREMENTS

Point 7: Production Timeline Compliance

Requirement: Production forecasts must be based on existing well performance and operational conditions.

Compliance Check:

•  Decline curve analysis uses appropriate historical data
•  Forecasts account for natural decline and any supported enhancement projects
•  Artificial lift requirements are identified

Point 8: PUD Documentation Requirements

Requirement: Each PUD location requires specific technical and economic documentation.

Compliance Check:

•  Offset well performance data supports reservoir continuity
•  Drilling and completion cost estimates are documented
•  Development schedule is specific
•  Capital budget allocation is confirmed
•  5-year rule is met or exception is justified

Required Documentation Package:

1. ___ Location map with offset well control
2. ___ Geological evidence demonstrating reservoir continuity
3. ___ Cost estimate worksheet
4. ___ Development schedule
5. ___ Capital authorization

SECTION 4: REPORTING & COMPLIANCE

Point 9: Third-Party Evaluation/Audit Engagement

Requirement: Independent third-party evaluation/audits are required for public companies.

Compliance Check:

•  Evaluator/Auditor meets SEC requirements for independence and qualification
•  Scope of evaluation/audit is clearly defined
•  Evaluation/Audit findings and recommendations are documented

Point 10: Disclosure Alignment

Requirement: Reserves disclosures must be consistent across all reporting documents.

Compliance Check:

•  10-K, 10-Q, and supplemental schedules are aligned
•  Management’s discussion and analysis addresses material reserves changes
•  Internal controls cover reserves estimation process

Point 11: Annual Reporting Deadline

Requirement: Reserves reports must be filed annually.

Compliance Check:

•  All data is as of December 31 or the appropriate fiscal year end
•  Audit opinion obtained (if applicable)
•  Filing deadlines are met

Common Red Flags That Trigger Audit Findings

Next Steps

After Completing This Checklist:

1. Prioritize gaps: Address high-risk items immediately
2. Engage experts: Consider third-party review before year-end
3. Document everything: Support all assumptions with data
4. Schedule follow-up: Set review calendar

Need Expert Assistance?

Wright & Company specializes in independent reserves evaluations that meet SEC, SPE, and industry standards.  Our team can:

• Conduct a gap analysis of your current classification process
• Perform a full reserves evaluation compliant with SEC guidelines
• Provide independent audit services with detailed findings
• Offer training for your technical and finance teams

CONTACT WRIGHT & COMPANY TODAY

Phone: (615) 370-0755
Email: info@wrightandcompany.com
Website: www.wrightandcompany.com

Wright & Company has served the petroleum industry since 1988, providing independent reserves evaluations, audits, and valuations to operators, investors, and financial institutions across North America.