Explainer
By Trent Klarenbach, BSA AgEc, PAg. Updated Oct 28, 2026
NI 51-101 is the Canadian rule for how oil and gas companies disclose reserves and resources. Each year a reporting issuer with oil and gas activities files a statement of reserves data (Form 51-101F1), a report from an independent qualified reserves evaluator or auditor (Form 51-101F2), and a report from management and directors (Form 51-101F3). Reserves are classified under the COGE Handbook: proved reserves (1P) target at least a 90% chance of recovering that much or more, and proved plus probable (2P) at least 50%. It is the energy patch's version of NI 43-101, and the headline numbers need the same skepticism.
Three annual forms: the F1 statement, the independent evaluator's F2 report and the management F3 report, plus an F4 notice when the information sits in another document.
1P targets 90% certainty, 2P 50%, 3P 10%. Possible reserves are optional to disclose.
Proved developed producing (PDP) reserves are already flowing. They are the most reliable bucket.
NI 51-101 says the net present value of future net revenue is not fair market value. NPV10 is a starting point, not a price target.
Undeveloped reserves need capital. Check future development costs and whether the company can fund them.
| Category | Certainty target | What it means for you |
|---|---|---|
| Proved developed producing (PDP) | Part of proved | Wells already producing. Closest thing to cash in hand. |
| Proved developed non-producing | Part of proved | Wells drilled but shut in or awaiting tie-in. Needs some money or time. |
| Proved undeveloped (PUD) | Part of proved | Locations not yet drilled. Needs capital to turn into production. |
| Total proved (1P) | At least 90% chance of recovering this much or more | The conservative number lenders often lean on. |
| Probable | Additional to proved | Less certain than proved. Adds upside and risk. |
| Proved plus probable (2P) | At least 50% chance of recovering this much or more | The most quoted number. A best estimate. |
| Possible | Additional to 2P | Optional to disclose. Speculative. |
| Proved plus probable plus possible (3P) | At least 10% chance | Treat as a stretch case, not a valuation. |
The probabilities are targets. Most evaluations use deterministic methods, so they are qualitative levels of certainty, not calculated odds.
Form 51-101F1, statement of reserves data. Reserves by category and product type as at year end, net present values of future net revenue, the price forecast used, a reconciliation of changes in reserves, future development costs and production history.
Form 51-101F2, independent evaluator's report. One or more qualified reserves evaluators or auditors, independent of the company, report on the reserves data.
Form 51-101F3, management and directors' report. Management and the board take responsibility for the disclosure and the process.
Form 51-101F4, notice of filing. Used when the F1 information is filed inside another document, such as the annual information form.
The reserves data is prepared as at the company's financial year end and filed with its annual disclosure on SEDAR+.
Form 51-101F1 requires the net present value of future net revenue, before and after income tax, undiscounted and at 5%, 10%, 15% and 20% discount rates, using forecast prices and costs. The 10% before-tax figure, NPV10, is the one in most press releases. Future net revenue is already after royalties, operating costs, development costs and abandonment and reclamation costs.
NI 51-101 states that future net revenue is not fair market value. Here is why that matters. Take a hypothetical producer with 80 million shares and C$60 million of net debt:
| Reserves basis | NPV10 before tax | Less net debt | Per share |
|---|---|---|---|
| PDP | C$110M | C$50M | C$0.63 |
| Total proved (1P) | C$180M | C$120M | C$1.50 |
| Proved plus probable (2P) | C$300M | C$240M | C$3.00 |
Same company, nearly a 5x range. The 2P figure assumes the company drills every undeveloped location, at the evaluator's price deck, and finds the money to do it. If the shares trade near C$0.60, the market is paying for producing wells and treating everything else as unfunded. Then check the after-tax numbers, which are lower.
Reserve life index is reserves divided by annual production. A company with 6 million boe of proved reserves producing 2,000 boe a day produces 730,000 boe a year, so its proved reserve life is about 8.2 years.
The reconciliation in Form 51-101F1 shows how reserves changed over the year: production, extensions and discoveries, technical revisions, acquisitions and dispositions, and economic factors. Repeated negative technical revisions mean earlier estimates were too generous.
Resources other than reserves can be disclosed under NI 51-101, with required cautionary language. Contingent resources are discovered but not yet commercial. Prospective resources are undiscovered. Neither is a reserve, and neither belongs in a valuation without heavy risking. A release that blends them into one big barrel count is selling, not reporting.
Timing. NI 51-101 runs on an annual cycle tied to the year end. NI 43-101 technical reports are triggered by events, such as a first resource or a material change.
Who signs. NI 51-101 uses an independent qualified reserves evaluator or auditor. NI 43-101 uses a qualified person, sometimes independent.
Categories. Oil and gas uses proved, probable and possible. Mining uses proven and probable reserves over measured, indicated and inferred resources.
For the mining side, read the NI 43-101 checklist and resource vs reserve.
Who the independent evaluator is, and the effective date.
The price forecast used, compared with the futures strip.
PDP as a share of 2P.
Future development costs, and whether cash flow and the balance sheet can fund them.
NPV10 before and after tax.
The reserves reconciliation, especially technical revisions.
Reserve life index on proved and 2P.
How long proved undeveloped locations have sat undrilled.
Whether press releases quote reserves, resources or both, and keep them apart.
Price realizations against benchmarks. For Canadian heavy oil, see the WCS differential.
For production metrics, netbacks and balance sheets, see how to evaluate a junior oil and gas producer. Terms are in the glossary.
What is NI 51-101? National Instrument 51-101 is the Canadian Securities Administrators' rule setting standards for how oil and gas companies disclose reserves, resources and related information.
What forms does NI 51-101 require? Each year: Form 51-101F1 (statement of reserves data), Form 51-101F2 (report of an independent qualified reserves evaluator or auditor) and Form 51-101F3 (report of management and directors), with Form 51-101F4 when the information is filed in another document.
What do 1P, 2P and 3P mean? 1P is total proved reserves, targeting at least a 90% chance of recovering that much or more. 2P is proved plus probable, at least 50%. 3P adds possible reserves, at least 10%.
Is NPV10 the value of an oil and gas company? No. NI 51-101 states that the net present value of future net revenue is not fair market value. It depends on the price forecast and assumes undeveloped reserves get funded and drilled.
What is the difference between reserves and contingent resources? Reserves are commercially recoverable from known accumulations. Contingent resources are discovered but not yet commercial, so they carry more risk and are not reserves.