El Paso settles SEC reserve reporting charges

El Paso Corp. and five former employees settled federal charges of inflating, or participation in inflating, reported proved oil and gas reserves in violation of federal securities antifraud laws, the US Securities and Exchange Commission said July 11.

Nick Snow
Washington Editor

WASHINGTON, DC, July 14 -- El Paso Corp. and five former employees settled federal charges of inflating, or participation in inflating, reported proved oil and gas reserves in violation of federal securities antifraud laws, the US Securities and Exchange Commission said July 11.

The five—Rodney D. Erskine, a former president of El Paso's exploration and production division; Randy L. Bartley, a former El Paso E&P senior vice-president; and Steven L. Hochstein, John D. Perry, and Bryan T. Simmons, former El Paso E&P vice-presidents—agreed to pay fines ranging from $40,000 to $75,000 without admitting or denying the SEC's allegations.

The complaint said that between 1998 and the quarter ended Sept. 30, 2003, El Paso and the employees inflated oil and gas reserves, overstated the Houston company's standardized measure of future cash flows, and overstated capitalized costs related to its oil and gas production.

In 2004, El Paso restated its financial statements for 1999-2002 and for the first 9 months of 2003. It reduced its previously reported total proved reserves by 2.2 tcf of natural gas equivalent for the end of 2002; 3.3 tcfe at yearend 2002; and 3.3 tcfe at yearend 2001. It also materially reduced its previously reported standardized measure of future cash flows.

The restatements reduced El Paso shareholders' equity as of Sept. 30, 2003, by $1.7 billion, according to SEC. Two subsidiaries, El Paso E&P and El Paso CGP Co. LLC, also restated previously issued financial statements to correct material overstatements of proved oil and gas reserves, standardized measures of future cash flows, and capitalized costs relating to oil and gas production activities, it said.

Contact Nick Snow at nicks@pennwell.com

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