80% of E&P Companies Expanded Proved Reserves Using New Technologies: UHY Study

A large majority of oil and gas exploration and production (E&P) companies are reporting that use of new “reliable technologies” is expanding their proved reserves, while an increasing proportion of E&P companies report that their board audit committee is involved in oversight of their internal financial controls related to reserves while outside third-party involvement as identified by registrants has been reduced, according to an analysis by the UHY LLP certified public accounting firm.
UHY’s review of 10-K annual reports filed in 2011 by 51 companies with E&P operations representing total proven reserves of 50 billion barrels of oil equivalent showed that “Upstream companies have largely implemented new reporting and disclosure requirements in ways that reinforce their strategic information and management needs while also improving public transparency,” said UHY LLP Audit Partner and National Energy Practice Group Co-chair Scott Barker.

In the second year E&P companies have reported under 2008 modifications to oil and gas disclosure rules, the proportion of companies that reported recognizing reserves based on the new “reliable technologies” rule increased almost one-third, to 83% of the review sample from 54%, the firm’s analysis found. Barker noted this increase may reflect changes in the profile of the types of plays in which companies are involved, as well as a more comprehensive understanding by financial and engineering management of the new SEC disclosure rules.
The other notable year-to-year change in reporting was an expansion of almost one-fourth to 94% of E&P companies which did not provide a reserves estimate based on an alternative price case to the SEC’s required 12-preceding-months-average calculation. “In the first year of adoption, many compaies disclosed this information; however, going forward we expect limited alternative price scenario information unless we experience extremely volatile commodity prices,” Barker observed.
The UHY LLP analysis also found that the proportion of companies providing an explanation for material amounts of proved undeveloped reserves that have remained undeveloped for 5-years or more, if any, declined slightly but remained at about one-third of the sample’s companies. In addition, a very high 93% of companies – the same proportion as a year earlier -- declined to take advantage of a reporting option to disclose unproved reserves, apparently concluding that any benefit gained would not be worth the additional reporting complications and potential risk exposure, Barker surmised.
Sarbanes-Oxley
In the 8th year since the Sarbanes-Oxley Act’s increased scrutiny of internal financial controls, four-of-ten E&P companies reported their boards’ audit committees were involved in the internal financial controls process related to reserves, up from 27% one year earlier. “This likely reflects a growing assessment by board audit committees that issues related to reserves are an increasingly significant aspect of the internal financial controls process.,” according to Barker.
At the same time, the portion of E&P companies that disclosed that they brought-in outside third-parties to their internal controls process declined to 60% from almost three-fourths in the prior year.
A detailed company-by-company breakout of 10-K filing information, including relevant references in the notes to companies’ financial statements and filings is available on the UHY Advisors’ website at: http://www.uhyllp-us.com/reserve-disclosures.

UHY LLP, a licensed independent CPA firm in Texas, performs attest services through an alternative practice structure with UHY Advisors TX, LLC. UHY Advisors TX, LLC (f/k/a UHY Mann Frankfort Stein & Lipp Advisors, LP) conducts operations in Texas as a subsidiary of UHY Advisors, Inc. The firm also has an office in Dallas. UHY Advisors, Inc. and its subsidiary entities have nearly 1,000 professionals providing services from offices throughout the United States. UHY Advisors is ranked as one of the Top 20 professional services firms providing tax and business consulting services in the country by Accounting Today.
UHY Advisors, Inc. and UHY LLP are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. For additional information, please visit their website at www.uhy-us.com.
UHY LLP is a licensed independent CPA firm that performs attest services. UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms.

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Media contact:
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This release was published on openPR.