CPG Advanced Professional Practice 2 — Questions and Answers
Question 1: A petroleum geologist discovers a significant reserve estimate discrepancy between their internal model and a third-party audit. What is the most professionally appropriate first step?
- Disclose the discrepancy to management and document the differences with supporting data (Correct answer)
- Revise the internal estimate to match the third-party figure without analysis
- Ignore the discrepancy if internal methods are more sophisticated
- Report the discrepancy directly to regulators before notifying management
Correct answer: Disclose the discrepancy to management and document the differences with supporting data
Professional standards require transparent disclosure of material discrepancies to management with full documentation before any corrective action.
Question 2: Under SPE-PRMS guidelines, which classification applies to quantities that are potentially recoverable but have not yet been committed to development?
- Proved Reserves
- Contingent Resources (Correct answer)
- Prospective Resources
- Possible Reserves
Correct answer: Contingent Resources
Contingent Resources are quantities associated with discoveries that are not yet commercial due to one or more contingencies.
Question 3: A CPG is asked to sign off on a reserve report for a public company. Which conflict of interest scenario MOST requires disclosure?
- The geologist previously worked at a competitor company
- The geologist owns stock in the company whose reserves are being evaluated (Correct answer)
- The geologist has never worked in the basin before
- The geologist disagrees with management's development timeline
Correct answer: The geologist owns stock in the company whose reserves are being evaluated
Financial interest in the company being evaluated is a direct conflict that must be disclosed and may require recusal.
Question 4: When estimating Proved Undeveloped Reserves (PUDs), what is the primary requirement under SEC rules regarding the development timeline?
- PUDs must be developed within 10 years of initial booking
- There is no time limit if geological certainty is demonstrated
- PUDs must be scheduled for development within 5 years unless specific circumstances justify a longer period (Correct answer)
- PUDs require annual reaffirmation by a certified petroleum engineer
Correct answer: PUDs must be scheduled for development within 5 years unless specific circumstances justify a longer period
SEC rules require that PUDs have a specific plan to be developed within 5 years of initial booking with limited exceptions.
Question 5: Which professional obligation takes precedence when a CPG's employer instructs them to overstate reserves for a financing transaction?
- Employer loyalty, since employment contracts supersede professional codes
- Confidentiality, so the geologist must comply but keep it internal
- Professional ethics and public protection, requiring refusal and potential whistleblowing (Correct answer)
- Peer consensus, so the geologist should consult colleagues first
Correct answer: Professional ethics and public protection, requiring refusal and potential whistleblowing
AAPG and SPE codes of ethics require members to protect the public interest and refuse participation in fraudulent activities regardless of employer pressure.
Question 6: A petroleum geologist is preparing a competent person's report (CPR) for a London Stock Exchange listing. Which standard is MOST applicable?
- SEC Regulation S-X Rule 4-10
- SPE-PRMS with JORC Code guidelines (Correct answer)
- NI 51-101 Canadian standards
- EU Taxonomy Regulation technical criteria
Correct answer: SPE-PRMS with JORC Code guidelines
LSE listings typically require CPRs prepared under SPE-PRMS guidelines, often with reference to the JORC Code for mineral and petroleum reporting.
Question 7: What does the term 'reasonable certainty' mean in the context of Proved Reserves under SEC definitions?
- A 50% probability of recovery
- A high degree of confidence that quantities will be recovered, generally interpreted as 90% probability or higher (Correct answer)
- Certainty confirmed by production history only
- An internal company standard set by management
Correct answer: A high degree of confidence that quantities will be recovered, generally interpreted as 90% probability or higher
SEC guidance interprets 'reasonable certainty' as at least 90% probability (P90) that stated quantities will be recovered.
CPG Advanced Professional Practice 2
A petroleum geologist discovers a significant reserve estimate discrepancy between their internal model and a third-party audit.
What is the most professionally appropriate first step?