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SEC approves new rules for oil reserves

SEC approves new rules for oil reserves

The Securities and Exchange Commission on Monday approved updated rules for energy companies that will require them to provide more detailed information to investors when reporting oil and gas reserves.
Reserves are an oil company's most valuable asset and a critical indicator of its long-term financial prospects. Any reduction in their estimated size is a concern for investors.
The SEC's reporting rules for oil and natural gas reserves were adopted more than 25 years ago, and the changes are intended to reflect technological changes in how oil companies determine their proven reserves.
"These updates to the SEC rules will help ensure more meaningful and comprehensive disclosure of information that, even though it does not appear on a company's balance sheet, is of significance to investors in making informed investment decisions," SEC chairman Christopher Cox said in a statement.
The changes were proposed in June and opened to a 60-day public comment period. The SEC approved the changes unanimously.
The newly adopted revisions:
_Allow companies to use new technologies to determine proven oil and gas reserves provided the technologies have been shown to lead to reliable assessments.
_Allow companies to disclose their probable and possible reserves to investors. Until now, SEC rules limited disclosure only to proved reserves.
_Require companies to report oil and gas reserves using an average price based on the prior 12-month period rather than year-end prices.
_Require companies to certify the independence of petroleum auditors that audit their assessments of reserves.
The American Petroleum Institute, the industry's trade association, said it was reviewing the new rules and had no immediate comment.
In August 2004, the SEC fined Royal Dutch/Shell Group $120 million _ one of the largest penalties against a company in an accounting case _ in connection with the overstatement of oil and gas reserves. The Anglo-Dutch oil giant's disclosure that year of reserve inflation stunned shareholders and the oil industry, and led to the dismissal of several top executives.
The company neither admitted nor denied wrongdoing in agreeing to pay the civil fine.


Updated : 2021-02-26 21:43 GMT+08:00