Oil reserves data: More than meets the eye

F&D is a popular little acronym these days for people who deal in oil shares. It stands for finding and development, meaning the costs of adding reserves. As you can imagine, it’s an important yardstick. Low is good, high is bad.

The numbers for 2008 are trickling out now, so there’s much ado about finding and development. If only they could find and/or develop a consistent definition for it. As things stand, F&D can be meaningless if you don’t know how to read it.

Here’s an example: Paramount Resources reported 2008 F&D of $366 a barrel. How do you like that arithmetic? Spend $366 to find a barrel of oil that sells for about 50 bucks. In case there are any math-challenged AIG swap traders reading, let’s just call it a big loss, although perhaps not by AIG swap-trading standards. And we’re generously ignoring production expenses. Generally speaking, selling for less than your cost won’t make you rich.
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