Effective and Nominal Rates

Decline Type	Description
Decline Factor Nominal 1 / year	The Decline Factor is the parameter D used in the decline equations. For the hyperbolic and harmonic formulations, the Decline Factor changes with time, so the factor is subscripted with i to indicate it is referenced to a specific time (t=0). Value Navigator sets its reference time to the last day of the most current month. This reference time is shown as Start Date on the Predictions tab
Decline Factor Nominal 1 / year	Use directly in equations Direct switch to exponential	Has no physical meaning Easily confused with effective decline factors
Effective Decline Secant Method % / year	This Effective Decline is the change in rate over the first year, expressed as a percentage of the initial rate.
Effective Decline Secant Method % / year	Average decline over 12 months	Understates severity of early steep decline Convert for switch to exponential Cannot use directly in equations
Effective Decline Tangent method % / year	This Effective Decline is the instantaneous decline at a specified time. It is calculated as the 1^st derivative of the rate time equation or from the slope of the tangent line to the rate time curve. See Decline Factor for the reference or specific time.
Effective Decline Tangent method % / year	Direct switch to exponential Shows severity of steep decline	Imprecise for steep declines Has no physical meaning Cannot use directly in equations

	Exponential	Hyperbolic	Harmonic
Secant Method Conversion
Tangent Method Conversion