Altered Picture for Big Oil Reserves Three Years After Shell

As a crystal ball into the energy industry’s prospects, proved crude-oil and natural-gas reserves aren’t as clear as they used to be, at least not for the biggest oil companies.

While energy investors still look to the annual computation of these hydrocarbons in the ground for all energy companies, Wall Street’s assessment of Exxon Mobil Corp. (XOM), BP PLC (BP) and other oil giants increasingly rests on other qualities, such as the market’s perception of executive competence, or a company’s proficiency in managing mega-projects that take years to develop.


By comparison, the reserves benchmark – an estimate of the quantity of oil and gas a company controls and will produce – is viewed as a somewhat more telling gauge of the future profitability for U.S. exploration and production companies, which extract oil and gas mostly from relatively simple, short-lived operations.

On Wednesday, Royal Dutch Shell PLC (RDSA) said it would pay investors outside the U.S. $352.6 million, plus administrative costs, related to a significant downward revision of its reserves in 2004. The company said it expects to settle with U.S. investors for around $80 million related to the matter.

Dow Jones Newswires