We have all heard that explorationists tend to over-estimate the resource potential of their exploration prospects and portfolios. We present several years of exploration drilling results from a predecessor company to support this view. In the context of probabilistic estimating methods, we propose that this is primarily the result of overestimating the small end of the lognormal resource distribution. And, we make suggestions on what can be done to improve the accuracy of our pre-drill resource estimates.
Practitioners of probabilistic resource estimation understand that the resource potential of a given prospect is represented as a lognormally distributed range of possible outcomes, from P99 (small) to P1 (large). On a probit scale, this distribution is represented by a straight line. We have found that most estimating errors are created by over-estimating the P99 end of the resource range of possible outcomes. We present some data to support this contention and offer a theoretical model that explains why the P99 should be a very small number.
Finally, we discuss former Secretary of Defense Donald Rumsfeld's infamous known knowns quote and suggest that the statement perfectly encapsulates the world of risk and uncertainty in which we work.