SEC proposes updated reserves reporting rules

Paula Dittrick
Senior Staff Writer

HOUSTON, June 28 -- The US Securities and Exchange Commission has released a proposed set of revised oil and natural gas reserves reporting requirements, and proposed changes include disclosure of estimated probable and possible reserves.

Currently, oil and gas companies report only estimated proved reserves to the SEC. Existing reserves reporting requirements were adopted more than 25 years ago (OGJ, June 20, 2005, p. 21).

SEC released its proposed rule revisions on June 26, and the agency is seeking industry response on the proposed revisions during a 60-day public comment period.

Earlier this month, SEC staff recommended that reserves reporting requirements be updated in order to provide more estimated reserves information to investors (OGJ, June 23, 2008, Newsletter).

"The ability to accurately assess proved reserves is an important part of understanding any energy company's financial position," said SEC Chairman Christopher Cox. "But the current oil and gas disclosure rules often interfere with an investor's analysis because they are tied to outdated technologies."

The proposed revisions suggest some clarifications in terminology for reserves and resources classification.

Defining 'reasonable certainty'
SEC proposes to define the phrase "reasonable certainty," which is the standard now used in the definition of proved oil and gas reserves, yet "reasonable certainty" is not defined. Consequently, it has been the subject of disagreement within industry.

"We propose to define the term 'reasonable certainty' as much more likely to be achieved than not," said SEC's proposed rule revisions.

The SEC also wants to clarify definitions for deterministic and probabilistic methods of estimating reserves. Both methods would be allowed under the proposed rule revisions.

Companies now use deterministic methods for reserves estimates that are reported to the SEC. Some companies use probabilistic methods for estimates reserves although those figures are used internally by executives within the company.

Previously, industry-recognized definitions covered only proved reserves based on deterministic estimating methods, which was the SEC requirement. In 1987, the Society of Petroleum Engineers (SPE) issued definitions for probable and possible reserves classifications that found wide acceptance in industry. SPE and World Petroleum Congress issued new definitions in 1997 that allowed for the probabilistic estimation of reserves.

Yearend prices
Another proposed revision would require companies to report estimated oil and gas reserves using an average price based upon the previous 12-month period. Currently, companies report reserves based upon yearend prices.

Some producers had suggested that the SEC and the US Financial Accounting Standards Board consider using average prices rather than single-day, yearend oil and gas prices as the basis for calculating estimated reserves reported in 10-K filings.

Financial Accounting Standard (FAS) 69, which FASB adopted in 1982, mandates the use of prices as of Dec. 31 of each year. Some producers said this practice distorts reserves volumes and values.

SEC said this rule change would maximize comparability of reserve estimates among companies and mitigate distortion of the estimates that arises when using a single pricing date.

Oil sands
SEC's proposed rule changes also include:

-- Permitting use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes.

-- Allowing previously excluded resources, such as oil sands, to be classified as oil and gas reserves. Currently these resources are considered to be mining reserves.

-- Requiring companies to report the independence and qualifications of a preparer or auditor, based on current SPE criteria.

-- Requiring the filing of reports for companies that rely on a third party to prepare reserves estimates or conduct a reserves audit.

Contact Paula Dittrick at paulad@ogjonline.com.

Related Articles

Western Australia taps Kimberley site for LNG hub

12/29/2008 Western Australia has chosen a site called James Price Point about 60 km north of Broome on the Kimberley coast to establish a proposed LNG hub for...

MMS chief hopes next president, Congress won't reinstate OCS bans

12/19/2008 US Minerals Management Service Director Randall B. Luthi said on Dec. 9 that he hopes the Obama administration and Congress seriously consider expa...

Pakistan plans $1 billion TAPI, IPI gas storage

12/17/2008 Pakistan says it will require $1 billion to build underground storage for gas to be imported from Iran and Turkmenistan, according to the country's...

MMS OCS Policy Committee plans first post-moratorium meeting

12/12/2008 The US Minerals Management Service's Outer Continental Shelf Policy Committee will hold its next meeting Dec. 9-10 at the Washington Dulles Crowne ...

BLM defends Utah lease sale as its state office defers more tracts

12/12/2008 The US Bureau of Land Management defended its scheduled Dec. 19 oil and gas lease sale in Utah on Dec. 2 as its state office deferred additional pa...

BLM Utah director defers lease parcels in response to Park Service concerns

12/12/2008 US Bureau of Land Management Utah State Director Selma Sierra agreed on Nov. 25 to defer from a Dec. 19 oil and gas lease sale all parcels of conce...

DOE appoints clean coal chief to lead fossil energy operations

11/28/2008 The US Department of Energy named Victor K. Der, a 35-year employee with DOE and its predecessors, as its new principal deputy assistant secretary ...

As BLM completes Utah resource plans, possible December lease sale draws fire

11/07/2008 New resource management plans for five of the US Bureau of Land Management's six Utah field offices received final approval on Oct. 31, while the s...

EPA diesel fuel emission reduction grants go to North, South Carolina

10/31/2008 The US Environmental Protection Agency presented grants of $295,320 each on Oct. 23 to North Carolina and South Carolina state agencies to establis...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected