Integrating Deterministic and Probabilistic Reserves

Summary Probabilistic reserves evaluation offers the opportunity to describe a reserves volume in terms of the specific statistical certainty associated with that volume, as opposed to relying on the definitions associated with deterministic reserve classifications. Where a reserves entity has volumes identified for two or more certainty levels, knowledge of the reserves distribution may be used to interpolate reserve volumes at other certainty levels. This interpolation forms the basis of statistical reserves aggregation. Assignment of confidence levels to the deterministic categories of Proved or Probable supports both deterministic and probabilistic reporting. This paper examines the mechanisms which control the shape of the reserves distribution curve; demonstrates the applicability of normal distribution curves to reserves distributions; and outlines a procedure for statistical reserves aggregation which may coexist with deterministic aggregation.