Estimated Ultimate Recovery (EUR)

An estimate of the total quantity of oil and/or gas that can ultimately be recovered from an oil reserve or a field

What is Estimated Ultimate Recovery (EUR)?

Estimated Ultimate Recovery (EUR) is a term specifically used in the oil and gas industry. It is the estimate of the total quantity of oil and/or gas that can ultimately be recovered from an oil reserve or a field. Simply put, it is the estimated quantity of expected total production from an oil reserve or well.

 

Estimated Ultimate Recovery (EUR)

 

Summary

  • Estimated Ultimate Recovery (EUR) is an estimate of the total quantity of oil and/or gas that can ultimately be recovered from an oil reserve or a field.
  • The EUR is classified into three different categories: proven reserves, probable reserves, and possible reserves.
  • The change in EUR depends on a few factors that directly affect the production of oil and gas. They include time duration, changes in production technology, or changes in oil production infrastructure, changes in methods of oil recovery, and so on.

 

Estimated Ultimate Recovery – Purpose

The estimated ultimate recovery (EUR) measure is of very high importance in the oil and gas industry. Every oil and gas recovery project is required to meet a satisfactory EUR threshold in order to be executed. Otherwise, the project is not considered to be feasible and profitable. It is the basic purpose of the EUR measure.

It is why the EUR is sometimes also referred to as the net present value (NPV) of the oil and gas industry. It gives the net present value of an impending project and helps ascertain whether it is feasible and profitable or not.

 

Estimated Ultimate Recovery – Categories

The EUR is further classified into three different categories, each based on the potential recoverability of the oil from a reserve or a field using the current infrastructure and technology. The three categories are:

  • Proven Reserves: Oil reserves with a 90% chance of recovering the oil
  • Probable Reserves: Oil reserves with a 50% chance or greater of recovering the oil.
  • Possible Reserves: Oil reserves with a recovery potential but of a less than 50% chance of recovering the oil.

 

EUR Calculation

The EUR is calculated using several different methods depending on the project to be carried out. However, it involves the use of the same few parameters including the cost of production, capital, the cost of oil, inputs, and technology used to extract oil, etc.

The production data that is taken is of a minimum of several months. It is done because the EUR is an estimation or approximation. Hence, several months’ data is required in order to avoid compromising the integrity of the approximation.

 

Changes in the EUR

The EUR doesn’t remain constant. For any production well, reservoir, or oil field, it can change with time. The change in EUR depends on a few factors that directly affect the production of oil and gas. They include time duration, changes in production technology, changes in oil production infrastructure, changes in methods of oil recovery, and so on.

Another aspect of oil reserves is that the potential of recoverability of an oil field changes over time. It is possible to convert the probable and possible reserves mentioned above into proven reserves with the passage of time and with the direct influence of the aforementioned factors.

 

Sources of Oil and Gas Production Data for Estimating the EUR

The prime source of domestic oil and gas production data for the purpose of estimating the EUR is the IHS Production Database from the IHS Energy Group, 2000. The group stores monthly oil and gas production data on a lease by lease basis.

In addition, oil and gas production data is also procured from the database of various state or governmental sources. After gathering all data, the EUR is estimated.

 

More Resources

CFI is the official provider of the global Certified Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

  • Measuring Natural Gas
  • Midstream Oil Operations
  • Oil & Gas Primer
  • Vertical Well

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Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!