The noise surrounding the disclosure of oil and gas reserves

Abstract

The goal of this thesis is to analyze the noise surrounding the disclosure of oil and gas reserves size on the annual reports, thus it evaluates if the oil and gas companies are underestimating or overestimating their reported reserves. Actually, this thesis also has an important role as SEC recently reviewed SFAS 69. Therefore, it addresses a currently debate about the best reporting practices of oil and gas reserves. By analyzing the modifications made to SFAS 69, we notice that even with the modernization of rules, they still allow noise in oil and gas reserves reporting. In the oil industry, disclosed information has large implications on companies’ results and the current accounting rule is not enough of an incentive for companies to report the actual reserves they own. To study this subject, we chose a sample of 25 top oil and gas companies and analyze their oil and gas reserves reported. It demonstrated that the total oil and gas reported reserves by the 25 top companies, is smaller than the world total estimated oil and gas reserves, which means, it only match 7% of world total oil reserves and 15% of world total gas reserves. Since it is an industry that has high level of geographic concentration of resources, in other words, small number of companies in a small number of countries controls most of the oil and gas reserves, we conclude that the majority of companies is underestimating their oil and gas reserves.

Date of Award	2012
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Reis (Supervisor)