SEC advances new reporting rules for oil companies

Reserves are an oil company's most valuable asset and a critical indicator of its long-term financial prospects. Any reduction in their estimated size is a concern for investors.

Securities and Exchange Commission staff members have made recommendations for new reporting requirements to be considered and voted on by the commissioners, the agency said in a news release.

Details of the recommendations weren't provided, but SEC Chairman Christopher Cox said they "reflect technological changes" in how oil companies determine their proven reserves. The SEC's current reporting rules for oil and gas reserves were adopted more than 25 years ago.

The proposals will allow oil companies "to provide investors with additional information about their oil and gas reserves," according to the release.

The SEC move comes at a time when global energy prices are spiking, gasoline in the U.S. is over $4 a gallon, and regulators are scrutinizing the role of speculators in world oil markets.

In August 2004, the SEC fined Royal Dutch/Shell Group $120 million--one of the largest penalties against a company in an accounting case--in connection with the overstatement of oil and gas reserves. The Anglo-Dutch oil giant's disclosure that year of reserve inflation stunned shareholders and the oil industry, and led to the dismissal of several top executives.

The company neither admitted nor denied wrongdoing in agreeing to pay the civil fine.

Cox said Thursday that the commissioners could vote on the proposed reporting rules this summer and open them to public comment. They could be formally adopted some time afterward.