Since exploration and production companies began filing their annual reports, I've been poring over disclosures regarding the new SEC reserve rules. Most companies have done a pretty fine job explaining the various impacts of these important changes to investors.
Take Anadarko Petroleum (NYSE: APC ) . Addressing the SEC's interest in better disclosure surrounding proved undeveloped (PUD) reserves, the company reported that 15% of PUDs were converted through development drilling during the year. That is a useful data point, because it helps to indicate how likely a company is to develop its remaining PUDs in the allowed time frame, which is now generally limited to five years. The company also reported the quantity of PUDs converted (100 million barrels equivalent), and the total cost ($1 billion), making for a simple calculation of the per-barrel cost to develop these reserves. At $10/barrel, that's one of the best development costs I've seen. Way to go, Anadarko.
Cabot Oil & Gas (NYSE: COG ) broke out exactly how many PUDs were removed from the reserve count (120.4 billion cubic feet of gas equivalent) as a result of the new five-year limit. This is good to know, because it shows how stale PUDs had gotten under the previous, more lax regime at the Securities and Exchange Commission. Chesapeake Energy (NYSE: CHK ) reported this data as well.
Devon Energy (NYSE: DVN ) stated in the plainest language possible the increase in its proved undeveloped reserves (91%) and the causes for the change. Like Forest Oil (NYSE: FST ) , Plains Exploration & Production (NYSE: PXP ) quantified the reserve additions (11 million barrels equivalent) stemming from the SEC rule expanding the definition of proved undeveloped reserves.
This is all very helpful reporting. At the other end of the spectrum is Goodrich Petroleum (NYSE: GDP ) . I've already chastised this company for hyping its Haynesville results. The company's not doing itself any favors by making such a poor disclosure. The following doesn't really require further comment:
Use of 12-month average pricing at December 31, 2009 as required by the new rules generally has resulted in reporting less proved reserves as of December 31, 2009 than under the previous rules. Other changes in the rules ... had differing effects, and sometimes opposite impacts on the final tabulation of reserves. Because of the potential increased expense and time required to prepare an analysis of a multitude of such input changes, we have chosen not to attempt such a reconciliation at this time.
OK, one comment:
Ugh.
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