Interpretation of Recent SEC Reserves Reporting Guidance
- Enrique Campo Morales (SGS Horizon) | John Lee (University of Houston)
- Document ID
- Society of Petroleum Engineers
- SPE Annual Technical Conference and Exhibition, 27-29 October, Amsterdam, The Netherlands
- Publication Date
- Document Type
- Conference Paper
- 2014. Society of Petroleum Engineers
- SPE PRMS, Regulations, Project, Undeveloped Reserves, SEC
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Since the release of its modernized reserves reporting rules in late 2008 (NARA, 2009), the U.S. Securities & Exchange Commission (SEC) has issued little formal guidance on proper interpretation of the modernized rules. The SEC staff issued major guidance in October, 2009, and guidance on a single issue in May, 2013. To supplement the new rules, the Financial Accounting Standards Board has issued revised accounting guidelines (FASB ASC, 2010), which extends some reporting requirements. In addition, we have observed some consistent patterns and clarifications in comment letters which the SEC has made public for filings covering the 2009, 2010, 2011, and 2012 fiscal years. Finally, there have also been a limited number of public presentations by SEC staff (e.g., in November 2009, April 2010, April 2011, August 2013 and June 2014), where SEC staff has provided some clarification on certain positions.
This paper summarizes the more important aspects of the SEC guidance and clarification provided to date, and includes a discussion of issues such as clarification of separate products whose reserves are required to be disclosed, situations in which exemptions to the “five-year rule” are either likely or not likely to be allowed, a refined definition of “project”, requirements for third-party reports in conjunction with 10-K or 20-F filings with the commission, status of resources that meet all requirements for proved undeveloped reserves except that they cannot be developed within five years, undeveloped locations more than one offset from existing wells and speed of converting proved undeveloped reserves into developed reserves.
An overview of other key issues raised by the SEC during the last four years is also provided. Potential differences between the SEC regulations and the SPE-PRMS (PRMS, 2007) are described.
After the first year of implementation of the modernized SEC reporting rules (NARA, 2009) the SEC devoted a significant effort addressing whether or not 2009 filings were compliant with the amended Rule 4-10 of Regulation S-X (referred to as Regulation S-X in this paper) and amended subpart 1200 of Regulation S-K (referred to as Regulation S-K in this paper). At that time, the SEC contacted a significant number of registrants with comments regarding their 2009 filings. As this was the first year using the amended regulations, special attention was given to several issues, especially the new requirements in the amended Regulations S-X and S-K (e.g., definition of geographic area, internal controls, and offset drilling locations). In the following fiscal years (2010, 2011 and 2012), although fewer registrants were approached by the SEC, the depth of the comment letters, showed that the SEC was shifting its attention to more specific issues that appeared to conflict with the amended regulations and on how registrants were complying with relevant requirements. Furthermore, in the last few years, the SEC has been requesting more details and granular information for its reviews (e.g., data spreadsheets, maps, performance plots, and decline analysis parameters).
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