Rusneftegaz can announce that a comprehensive external audit of our known hydrocarbon reserves has been completed in accordance with the standards prescribed in the Petroleum Resources Management System, otherwise known as PRMS. The survey, which was conducted by DeGolyer and MacNaughton, provides an opinion with regard to both the precision and quality of the estimates formulated by our organization when calculating the extent of our petroleum deposits. In this instance, we provided the inspectors with all material accounts, records and reports necessary, not limited to but including geological data, details regarding the reservoir engineering procedures utilized, in conjunction with any other evidence deemed relevant to this investigation. It should be noted that no independent verification of the information we furnished was conducted by a third party, including through on-site visits to our production areas, as the provision made by our company was considered both appropriate and sufficient for the analysis. The detailed study pertains to the condition of all our known and viable reserves as of 31 December 2015, with the intention that the facts enclosed in the audit can be used when formulating our consolidated financial statements for the past twelve months. The inspection itself was organized by a delegation of highly experienced staff, all of whom earned at a minimum a bachelor’s degree in petroleum engineering, geosciences or a related discipline, in addition to holding the relevant professional license or registration to operate in this field from either a recognized self-regulating organization or an appropriate governmental authority.
In total, 15,0% of our total proven remaining hydrocarbon reserves were subjected to review, with the auditor making observations regarding the suitability of the methodologies employed when estimating the volume of our reserves and the quality of the data used when making such calculations. Once these pertinent facts had been established, the integrity of the final computation was considered by accounting for the PRMS classification of each individual reserve, in accordance with the appropriate definitions, and to the extent the final estimation process was reasonable and thorough. Following the audit, the inspectors determined a final estimation of the quantity of recoverable hydrocarbons, in conjunction with an evaluation of the uncertainty affiliated with such a judgment. However, the statements regarding the proven reserves made in the report are merely approximations and are not exact, and if excavated, could be significantly greater or less than the stated figures. These totals are only to be revised if new or additional engineering or geologic data becomes available, or for the tabulations of the monetary value of these deposits, there are fluctuations in commodity prices. At the conclusion of this, our Deputy Chief Executive Officer, Aleksandr Filyurin, issued the following remarks:
“I am very pleased by the work conducted by my esteemed friends at DeGolyer and MacNaughton, they conducted their work with diligence and professionalism, and the board and I would like to extend our thanks for their efforts in doing this for us. From an internal perspective, it is very important that we did this work. When we took leadership positions at Rusneftegaz last year, we knew that we had to do as much as possible to gain a full understanding of our operations, and we thought that a full audit would be the best solution to this problem. This was the most comprehensive and technologically advanced audit in the history of this company, because we wanted to know how we could improve what we were already doing to make our production better and more efficient. Obviously because of this, it took time and more of our own resources than we expected, but we are now satisfied that we have a greater knowledge of the geology of our licensed areas. The most pleasing aspect of this process is that our previous estimations for the size of our petroleum deposits were within the margin of error, which I think demonstrates the ingenuity of our engineers. This was obviously a very useful process for us, and I would not hesitate to ask our friends at DeGolyer and MacNaughton to do this again in the future.”
At the end of the last financial year, management believed that our company held 174,26 million barrels of oil equivalent, abbreviated to MMBoe, across all our extraction sites. All these locations are situated in the Timan-Pechora basin of Western Siberia, across both the Komi Republic and the Khanty-Mansi Autonomous Okrug, where our organization operates twenty-six long-established oilfields. Each of these areas is considered to be highly productive and of good quality, despite indications of depletion, although it has been observed that the majority of reservoirs are smaller than average. Ultimately, the audit concluded that both the fiscal and geological calculations made by Rusneftegaz are reasonable, and within 5,0% of each estimate of DeGolyer and MacNaughton. Our proven reserves were primarily evaluated using performance and volumetric methodologies, or a combination of the two in unison. Under certain circumstances, analogy methods were also developed, but were mostly eschewed in favor of other techniques. The former involved utilizing decline curve analysis, whereas the latter used extrapolations of previous pressure and production data. For wells currently operating, future extraction rates were projected by examining performance statistics in prior years. If no downward trends were observed, forecasts remained consistent with contemporary data or were adjusted for the impact of potential curtailment, when necessary, until a decline was anticipated, with this alteration accounting for an approximated rate of depletion. If a negative pattern was previously determined, this is then used as a basis for predicting future production rates.