Oil companies want SEC to loosen reserves rules

Thanks to record profits, oil companies are finding it easy to fatten up their bank accounts. But they’re having a tougher time convincing skeptics how much oil and natural gas they have in the ground, which is the measure that Wall Street uses to gauge the companies’ future profitability.

Big Oil’s proposed solution to this dilemma? Change how reserves are measured.

A new industry-backed report proposes to let the companies be the best judge of their own stores of oil and gas rather than use a strict formula imposed by the Securities and Exchange Commission. The companies argue that the SEC’s method — intended to provide investors with apples-to-apples comparisons — is archaic and arbitrary, and undercounts the amount of energy on tap for the future.

It’s a big issue for the energy industry and its investors: Wall Street and the SEC view a company’s success at replacing the oil and gas it pumps out of the ground as a fundamental reflection of its value.

Wall St. Journal