Implementing the plan depends upon resources. This means capital, equipment, and, of course, people. Talent is necessary to make it happen, and talent seems to be one of the first things to go when times are tough. Access to talent is key.

Since they are not encumbered by company processes, which are necessary for regular employees, they can be productive on project work all day long.

Our business model is addressing your peak load leveling requirements. It is not necessary to pass on an opportunity because the people are not readily available within your organization. Consider the various ways outside help can create value without hampering your regular operational efforts. How about having somebody at hand to evaluate opportunities when you're faced with one too many targets for acquisition? Leases expiring? Someone could help look for and package prospects. Opportunity poor? You need the right person with the regional expertise to tackle a field study. Facility and well performance problems? The talented engineer is there who knows de-bottlenecking, production modeling or just plain well analysis.

Knowing where to find resources should be part of every good plan. It is the center piece of ours.

In this issue we continue our discussion of proved reserves. The SEC Regulation SX, Rule 4-10, states that "Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test." The SPE/WPC definitions have similar language, but go on to say "In certain cases, proved reserves may be assigned on the basis of logs and/or core analysis that indicate the subject reservoir is hydrocarbon bearing and is analogous to reservoirs in the same area that are producing or have demonstrated the ability to produce on formation tests." While the SEC definitions make no allowance for using log or core data, guidelines published by the SEC engineers state that proved reserves can be assigned if core and log data indicate the reservoir is analogous to a proved reservoir in the same field. It is important to note that the SPE/WPC definitions allows the use of logs or core data, whereas the SEC requires both. Also, the SEC requires the analogous reservoir to be in the same field, whereas SPE/WPC uses the phrase "same area".

The requirement for a production test is especially significant in deepwater fields. All U.S. companies in the deepwater are publicly traded and are required to use the SEC definitions. For many of these firms, a deepwater discovery can result in a significant increase in their reserves. These firms don't want to wait one to five years for first production before reporting these reserves. Neither do they want to spend what may be several million dollars running "conclusive formation tests".

Log, core, and other data may provide the reasonable certainty for a company to authorize spending several hundred million dollars to develop the field, but still not satisfy SEC requirements. Some firms apparently have been reporting the reserves as proved without the required test, not wanting to report to shareholders the large capital expenditures without the accompanying reserves. Last year, the SEC sent all companies with deepwater holdings a questionnaire to see how prevalent this practice is. We've been told the SEC has "followed up with a number of companies with additional rounds of questions. Those questions were specific to the company based on their responses to the first questions and to their reserve disclosure in their SEC filings. [The SEC is] still considering all the responses."

Although there is much debate within the industry, the SEC is not currently considering amending their definitions. As exploration moves into ever-deeper waters, the debate will continue. It will be interesting to see how this continues to unfold.