Are the major oil companies growing their reserves like they used to?
I’ve read that they aren’t. – T.N. A: Some are and some aren’t – and that’s vital information for anyone interested in investing in oil. Reserves are the lifeblood of an oil company. An oil company makes money by selling off its reserves. How efficiently a company replaces its reserves tells you nearly all you need to know about the company’s future. As large oil discoveries get harder and harder to find, oil companies are having trouble growing their reserves like they used to. Resource nationalization is also hurting Big Oil. Think of an oil company like a dairy. An oil company that doesn’t replace its reserves is like a dairy that sells 50 gallons of milk every day, but only gets 40 gallons out of its cows. Eventually it will go out of business. That’s a bit of an oversimplification, because there are many ways to look at reserve replacement. For example, you could look at the one-year change in reserves.
