The correct reference for the SAMOG Code is:
THE SOUTH AFRICAN CODE FOR THE REPORTING OF OIL AND GAS RESOURCES (THE SAMOG CODE), 2015 EDITION
History and Background
Oil and gas reserves disclosures are one of the most important pieces of information that the financial sector requires in order to analyse, compare and contrast the past and possible future operational performance of companies in the Petroleum Industry. Reserves Audits are the input to the asset valuation and therefor the Company value. Reserve Reports should provide information both technical and economic in support of the company’s financial statements and should better reflect the underlying worth of the company compared to its balance sheet. The balance sheet often reflects the historical cost associated with drilling for and development or acquisition of hydrocarbons, and may not reflect the value of the hydrocarbon assets.
In early 2000, reserves re-categorizations by several companies demonstrated the inadequacy of the published information at the time. Subsequently several recommendations were made that helped improve the communication between the Petroleum companies and the financial sector with regards to reserves reporting. Often the internal company knowledge is too detailed, too dynamic, and too complex for “outsiders” to share in full, and in many cases, it is subject to confidentiality agreements between partners or the host state. Therefore, it was realised that there was a need for standardised reporting to a common code for companies and investors
In 2002, the Calgary Chapter of the Society of Petroleum Evaluation Engineers (SPEE), working with the industry and regulators, developed the Canadian Oil and Gas Evaluation Handbook (COGEH) that was adopted by the Canadian Securities Administrators (CSA) as the technical reference for the disclosure of Canadian petroleum reserves and resources. In 2007, the American Association of Petroleum Geologists (AAPG), the Society of Petroleum Engineers (SPE), the Society of Petroleum Evaluation Engineers (SPEE) and the World Petroleum Council (WPC) revised and updated their classification system known as the Petroleum Resources Management System (PRMS) that was adopted as the technical reference for the disclosure of American and Australian petroleum resources and reserves. Currently there are minor differences between these two guidelines (in the definition of proved reserves where the PRMS definition states that proved reserves “can be estimated with reasonable certainty” and “reasonable certainty is intended to express a high degree of confidence”. While the COGEH definition states that proved reserves “can be estimated with a high degree of certainty”), however there is an initiative to merge them. The definitions in the PRMS, COGEH and the related classification systems are now in common use internationally within the petroleum industry. They provide a measure of standardised reporting, and reduce the subjective nature of resources estimation. However, the technologies employed in petroleum exploration, development, production and processing continued to evolve and improve. The above-mentioned organisations work closely together to maintain the definitions and issues periodic revisions to keep current with evolving technologies and changing commercial opportunities. The definitions and guidelines in the PRMS are designed to provide a common reference for the international petroleum industry, including national reporting and regulatory disclosure agencies, and to support petroleum project and portfolio management requirements. They are intended to improve clarity in global communications regarding petroleum resources. The second edition of the COGEH (2007) adopted the 2007 PRMS classifications system.
The SAMOG committee has developed a working relationship with the Alberta Securities Commission (ASC) in order to assist with the practical application and maintenance of the South African Code for the Reporting of Oil and Gas Resources (SAMOG Code) which disclosure requirements were guided by the Canadian National Instrument NI 51-101 (petroleum reserves and resources disclosure rules). Adaptations have been made so the SAMOG Code complies with the specific South African Stock Exchange Requirements. To comply with the SAMOG Code the Qualified Reserve Evaluators (QRE’s) will have to use either the COGEH or the PRMS as the technical reference for the petroleum reserves and resources disclosures. Currently there are minor differences between these two guidelines, however there is an initiative to merge them.
The SAMOG Code provides the basis for minimum disclosure of information for public reporting of oil and gas reserves and resources. If a public report is claimed to have been compiled in accordance with the SAMOG code, then the report and the author are subject to the minimum standards and requirements of this Code as well as the complaints procedure of the SSC. A public report is seen as a report prepared for the purpose of informing investors or potential investors. Public reports include but are not limited to: a) Company annual or quarterly reports; b) Expert reports and other technical papers released to the public; c) information memoranda, websites and public presentations.
The SAMOG code applies only to information of oil and gas activities that is material with respect to a reporting entity. Information is thought to be material if it would be likely to influence a decision by a reasonable investor to buy, hold or sell a security of the reporting entity. Oil and gas activities is seen as any activity dealing with the search for hydrocarbons, acquisition of hydrocarbon assets and removal of hydrocarbons from their natural location.
Reserves and resources evaluation that will be disclosed to the public must be prepared by a Qualified Reserves Evaluator (QRE). The QRE should be a suitably qualified and experienced person who is subject to an enforceable professional code of ethics and must have a minimum of 10 years practical experience in petroleum engineering, geology or geophysics, with at least three recent years of such experience in the evaluation of reserves and resources.
The disclosure of reserves and other information must follow the guidelines as described in Form A published in the SAMOG code.
Reserves and Resources Classification (Fig. 2):
Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to know accumulations from a given date forward under defined conditions.
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 a given date forward, from known reservoirs and under defined economic conditions, operating methods and government regulations. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate (1P).
Figure 2: SAMOG Figure 1
Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the Proved plus Probable reserves (2P).
Possible Reserves are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recoverable than Probable Reserves. When probabilistic methods are used, there should be at least a 10% probability that the actual quantities recovered will equal or exceed the Proved plus Probable plus Possible (3P) reserves.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies.
Prospective Resources are those quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations.