Right now, the oil and gas companies are announcing their results and are mostly posting significant gains. Not surprising, as the prices of oil and gas remain sky high and return hurdles at the bottom. Any company in this business not making rent returns (that is greater than the norm) needs to look deeply at their performance.
What we have also seen, however, is that companies that need to report in various jurisdictions, are making significant adjustments. The one that hits the headlines is the varying ways that regulators are measuring proven and probable reserves. To the extent that Shell, BP and others recently announced a reserves replacement rate of below 100% in their US reporting (that is that their new additions to oil and gas reserves was below than consuption or sale in the same period). Whereas, under UK regulations, their reserves replacement rate was above 100%, that is, they added to their total reserves.
This does not make sense and it would be easier to judge management performance, including transparency in reserves and other numbers, if we had a more unified approach.
Deloitte rightly calls for regulators to get together on their definitions.
OAM
Deloitte is urging regulators around the world to update reporting requirements for oil and gas reserves to expand the scope of mandatory disclosures in annual reports and financial statements. The recommendations published today in a report by Deloitte’s global oil & gas group seek to work with the industry to improve information available to markets and restore investor confidence in reserves reporting.
See full Press Release.
Related links:
Impact of interim reporting receives model accounts, Deloitte
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