reserve replacement ratio (RRR)

Definition

The ratio stakeholders use to analyze the operating performance of companies in the oil exploration and production industry. RRR is a function of the amount of oil added to a company's proven reserves compared to the total amount of oil the company produces during the year. Assuming stable demand, if this ratio falls under 1:1 then the company is tapping into its reserves and will eventually run out of oil.

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The reserve replacement ratio was a useful metric to analyze the oil company who kept a large amount of reserves.

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If you are going to decide which company to invest in you should first check out their reserve replacement ratio.

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You should try and figure out a way to use the reserve replacement ratio in your companies favor for the long term.

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