Increasing Attention by Industry to SEC Reserves Reporting Requirements
Petroleum reserves, by far, are the highest-value asset for oil and gas companies. The reporting of that value by public issuers has taken on new importance in the post-Enron era. Against that backdrop, petroleum evaluators and the U.S. Securities and Exchange Commission staff discussed reserves booking issues that some E&P companies said were inconsistent, unclear or confusing at the fourth annual Society of Petroleum Evaluation Engineers (SPEE) Forum, Oct. 28, in Houston.
In several cases, a recurring quandary arose over corporate governance issues and SEC-regulated reporting practices in light of recent geoscience and engineering advances in the petroleum industry. The prevailing SEC reserves definitions have remained virtually unchanged since 1978. New technology in use since that time has affected the applications of these definitions, which have not been revised accordingly.
Petroleum engineers, geologists and financial specialists presented cases for open comment by SEC engineers Jim Murphy and Ron Winfrey, who, at press time, were scheduled to attend.
One SEC interpretation expected to draw much attention was the agency's recent hard-line stance on downdip hydrocarbon limits below lowest logged depths in a given reservoir. At this year's SPEE annual meeting, an SEC representative said that the agency would only allow calculation of a contact to the lowest logged depths with no exceptions.
At past SPEE forums, SEC representatives said that they would consider arguments for calculating contacts based on "compelling" cases involving MDT (modular dynamic formation tester) pressure-gradient data and seismic information. The SEC engineer said he reverted to the stricter interpretation, citing abuse of the "technology case" by some producers.