Gum Deniz Oil Field played the important role in energy production from Caspian Region. The Field is still under production and needs further engineering studies to recover more energy from the remaining reserves by controlling environmental issues. Therefore, the reservoir performance and drive mechanisms of an oil reservoir in Gum Deniz Oil Field, Azerbaijan, were determined by material balance and simulation studies. The oil in place, average reservoir pressure, amount of water encroachment, fluid saturations, recovery factor and the type of reservoir drive mechanisms were estimated based on field production data. The estimated oil in place was 35.4 MMstb. Initially, the dominant reservoir drive mechanism was depletion drive together with compaction drive and fluid expansion mechanisms. After water encroachment, both water drive and depletion drive mechanisms played important roles on fluid production. The current and ultimate recovery factors were obtained as 25 and 37% of OOIP, respectively.