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SEC Disclosure Standards (SEC-2009)


Rawdon Seager, Gaffney, Cline & Associates

At the end of December 2008, the United States Securities and Exchange Commission (SEC) published revised regulations for the reporting of oil and gas reserves (Rule 4-10(a) of Regulation S-X).  The previous rules had been in place since 1978 and the industry was becoming increasingly critical of the limitations imposed by these old regulations that ignored the very significant changes in technology that have taken place in the interim, as well as the mandated one-day price requirement and limitations on reporting non-traditional hydrocarbons or unproved reserve categories. 

After a year of consultation, new rules, together with a lengthy discussion document, were published to be applicable effective January 1, 2010 to all filers with annual reports (10-K or 20-F) effective on or after 31st December, 2009 (and not before).

The new regulations are much more “principles based” than “rules based”, allowing for future and as yet unknown technological advances to be accommodated without needing to change the regulations.  The SPE et al “Petroleum Resources Management System” (SPE-PRMS) released in March 2007 formed a guide – and sometimes a verbatim source – for some of the revised definitions.  There will now be much less difference between these two sets of definitions, which will ease companies’ (and consultants’) burdens.

This session will address the four key areas of interest to companies, investors, and securities analysts that received the attention of the SEC for revision:

  • Oil and gas pricing – the change from a single-day price.
  • The role of technology – the recognition of the role of technological advances with the onus on the company using it to demonstrate that it is “reliable”.
  • Reporting of probable and possible reserves – now permitted (but not mandated).
  • The incorporation of “non-traditional” hydrocarbons (such as bitumen) into oil and gas activities.

Other important changes will briefly be touched upon.

Overall, the revised reporting requirements go a long way to addressing the industry’s criticisms of the current regulations.  There are a few areas that may be subject to some ambiguity in interpretation and it is reasonable to expect that certain clarifying guidance may be issued in the future.


AAPG Search and Discovery Article #90098©2009 AAPG Education Department, Houston, Texas 9-11 September 2009