The US Securities and Exchange Commission unanimously approved changes to its reporting requirements for oil and gas producers which reflect technological improvements over the last 25 years, the SEC said on Dec. 29.
It said that the new disclosure requirements include provisions which permit use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes. They also allow producers to disclose probable and possible reserves, in contrast to the earlier rules which limited disclosures to proved reserves.
"These updated rules consider the significant changes that have taken place in the oil and gas industry since the adoption of the original reporting requirements more than 25 years ago," said John W. White, director of the SEC's Corporate Finance Division.
The new disclosure requirements also require producers to report the independence and qualifications of entities which evaluate or audit reserves, file reports when a third party is used to prepare estimates or audit reserves, and report oil and gas reserves using an average price based on the prior 12 months instead of year-end prices, according to the SEC.
Use of an average price will lead to more reliable comparisons of reserves among producers and mitigate distortion of estimates that can result from using a single pricing date, it explained. The full test of the changes will be posted on the commission's website as soon as possible, the SEC said.
"In the more than a quarter century since the SEC last reviewed its rules in this area, there have been significant changes in technology that have increasingly limited the usefulness of current disclosures to the market and investors. 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," said SEC Chairman Christopher Cox.
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