Reserve Replacement Ratio
The amount of new proved oil and gas reserves a producer added during the year divided by the amount it produced, shown as a percentage or ratio. Above 100% means the company replaced everything it pumped and grew its resource base; below 100% means it is depleting faster than it is replacing, living off its inventory. Because an E&P company is ultimately liquidating a finite resource, the reserve replacement ratio is the long-run sustainability metric -- a business that cannot consistently replace production is slowly winding itself down. Read it with finding and development cost to judge whether the reserves were added economically.
Related terms
Absorption Rate · AFFO per Share · Allowed Return on Equity · Alternative Investments · Anchor Tenant · Assets Under Management
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