PV-10
The present value of estimated future net cash flow from oil and gas reserves, discounted at 10%. An industry-standard reserve valuation benchmark.
PV-10 is the present value of the future net cash flow a property's reserves are expected to generate, discounted back to today at a 10% annual rate. The discount reflects that a dollar of royalty income years from now is worth less than a dollar today, and the 10% rate is a long-standing industry convention that makes reserve reports comparable across companies and deals.
The calculation starts from projected production along the decline curve, applies price and cost assumptions, then subtracts operating costs, severance and ad valorem (production) taxes, and capital before discounting the resulting net cash flow. Note that PV-10 is conventionally a pre-income-tax measure — it does not deduct the owner's federal income taxes, which is what distinguishes it from the SEC's after-tax "standardized measure." Weighting toward proved developed producing reserves makes a PV-10 more reliable than one leaning on wells not yet drilled.
PV-10 is a serious engineering-grade valuation, more rigorous than a quick cash-flow multiple. The number is only as good as its price deck and reserve estimate, so a buyer should always check the assumptions behind it. See our guide on mineral rights value.