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Question
Hi Cliff,

This is a basic concept question. Could you explain me the difference betweem Production and Sales Volume for a E&P Firm. I have observed that the Production Volumes are either greater than or equal to Sales Volume. Why is it that Sales Volume can be lesser than Production Volume. coz I believe whatever gets produced is sold off to the downstream company for refining. Does a part of the production volume get added to Reserves ?

Thanks

Answer
There are very few reasons the two numbers would differ and they would only differ on natural gas. Oil will only differ if there is some kind of leak.  

On natural gas, the two possibilities that I am aware of are:

1.  The pump or other equipment is using natural gas to power the pump motor rather than electricity.

2.  The production amount is listed in MCF and the sales is based on BTU.  If the BTU rating of the natural gas is below the contract price the MCF's produced will be reduced to accommodate for poor (or rich) BTU amount of the gas.

Sincerely,

Oil/Gas

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Cliff Williams

Expertise

I will try to answer any question you have. Even if I reject a question, I still will give a shot at what I would do in your position. The only questions I will not take a shot at would be a highly technical engineering or geological question. I am beginning to see quite a few questions from land men and other oil companies and that doesn't matter to me either. I will attempt to help.

Experience

I am an oil and gas attorney that has been in the business for more than 20 years. I have held a series 22 and 63 securities license, been in oil and gas operations, land man, division order analyst all prior to obtaining my law degree. Today, I typically write title opinions verifying ownership of oil and gas minerals, assist landowners in negotiations on oil, gas and mineral leases, easements and conveyances. I also assist oil and gas companies with the sale of working interest ownership as well as common business law issues.

Organizations
State Bar of Texas, Member of the Tarrant County Bar and the Dallas County Bar Associations.

Publications
Multiple oil and gas topical columns on ezine.com.

Education/Credentials
I have a B.S. degree which I rely upon more than my Business Mgmt degree or Law degree...

Awards and Honors
Husband and father of 26 years

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