When valuing an oil and gas tract, both current and future wells should be considered. Undeveloped reserve value is the additional value from reservoirs with oil and gas reserves with potential to be recovered through future investments.

Valuing undeveloped reserves requires consideration of the certainty and quantity of remaining hydrocarbons. A reservoir with a large amount of proven hydrocarbon volumes may have very little value beyond the existing producing wells if the engineers and geologists are reasonably certain the existing wells will sufficiently (and economically) drain the reservoir. The remaining reserves would have value, but the value would be assigned to each well (see previous sections of this report).

Likewise, a reservoir with a large potential for hydrocarbons but no wells nearby or on the tract to prove the quantities are indeed recoverable would have a reduced value due to the uncertainty in quantity.

Note: Greater than 100% Developed or Proven can occur when the reservoir is developed at more than our modeled maximum well density for the area. For example, if we expect 5 wells per section in a specific reservoir based on the area's trends, but an operator drills 6 wells to test a new completion or spacing density, this would "over develop" the section. Over development may increase speed of expected recovery, and individual well performance is included in our valuation, but the ultimate total expected recovery and value must be proven to be effective before our overall development model is adjusted for an area.