Classifications and definitions

For a quantity of petroleum to be classified as reserves the decision must be made that the accumulation will be developed and put into production within a reasonable timeframe. Other quantities are designated as resources. All estimates of reserves and resources involve a certain degree of uncertainty, which is primarily due to the geological data available at the time of appraisal and the interpretation of this data. Reserves and resources are therefore divided into various categories depending on the relative uncertainty that exists.

Definitions

Guidelines
PA Resources utilises the 2007 guidelines and classifications in the Petroleum Resources Management System (SPE PRMS 2007) but adjusts for inert content in its contingent gas resources as described above

Assessments and audits 
ERCE has conducted an independent third party audit of the Company’s Reserves and Contingent Resources as of 30 June 2014. This review by ERCE is the Company’s first comprehensive independent audit of its assets. Going forward, PA Resources intends to have its reserves audited on an annual basis.

Oil price
All reserves as of June 2014 were calculated using an oil price forecast, supplied by ERCE, which assumes $100 escalated at 2.5% per annum.

Working interest and Net Entitlement
PA Resources has historically reported its reserves on a working interest (or WI) basis as well as on a Net Entitlement basis. Working interest reserves illustrates the company’s gross volume of the fields’ total reserves before reductions. Net entitlement reserves shows the company's net volumes after deductions for royalties and other taxes, reflecting the production and cost sharing agreements. Resources are only reported on a Working interest basis.

As part of the June 2014 audit, only working interest reserves were reported supplemented by a full valuation of reserves and contingent resources.

Reserves

Proven reserves (1P)
Proven reserves (1P) means the estimated amount of petroleum which has a very high probability (greater than 90 percent) of being able to be recovered from proven accumulations in the current financial circumstances and under current operating conditions.

Probable reserves (2P)
Probable reserves are reserves that are likely to consist of recoverable oil and gas accumulations. Proven plus probable reserves (2P) must have more than 50 percent probability of being technically and financially recoverable in the current or future financial circumstances.

Possible reserves (3P)
Possible reserves are reserves for which analyses indicate that it is less likely that they will be able to be recovered. Proven plus probable plus possible reserves must have more than 10 percent probability of being technically and financially recoverable in the current or future financial circumstances.

Resources

Contingent resources
Contingent resources means the estimated recoverable volumes from known accumulations that have been proven through drilling but which do not yet fulfil the requirements for reserves.Because PA Resources has several fields with high inert contents, in quoting its Contingent gas Resources PA Resources nets the gross, raw gas resources down to the anticipated inert level at the point of sale.

Prospective resources
Prospective resources means the resources estimated to exist in prospect  areas considered viable to drill, but which have not yet been proven by drilling. PA Resources includes resources in leads in this category. 

Risked prospective resources
Risked prospective resources means the prospective resources estimated to exist based on geological and technical investigations, taking into account the probability of discoveries.

Leads
Leads are possible accumulations of hydrocarbons where more data needs to be gathered and analysed before they can be called prospects, where drilling is considered to be feasible.