The Wall Street Journal: BP, Norsk-Hydro Differ in Booking Field’s Reserves
By CHIP CUMMINS
Staff Reporter of THE WALL STREET JOURNAL
June 30, 2004; Page A2
LONDON — Further muddying the water for energy investors, two large European companies took drastically different tacks in booking reserves from the same natural-gas field after months of discussion with U.S. regulators.
In its annual filing with the Securities and Exchange Commission, BP PLC retained all of its previously booked reserves of 209.1 million barrels of oil equivalent from the Ormen Lange field offshore Norway. But Norsk Hydro ASA slashed its bookings from the field by 102 million barrels to 234 million. Both companies are partners in the large natural-gas project.
A spokesman for Norsk Hydro said the company is “changing our methodology” to correspond more closely to SEC guidelines.
The Ormen Lange project has highlighted the confusion energy investors face after Royal Dutch/Shell Group’s admission this year that it massively overstated its energy reserves. The Anglo-Dutch oil company cut its SEC-booked reserves by more than a fifth and is due to submit its SEC filing today.
Shell booked Ormen Lange reserves well before partners in the project, which included London-based BP; Norsk Hydro, a Norwegian oil company; and others such as Exxon Mobil Corp. In March, Shell sharply revised downward its bookings at Ormen Lange to 90 million barrels of oil equivalent from 256 million barrels originally. That reduced its reserves to just 20% of its stake in the field’s estimated total pool of recoverable gas, down from about 57% of its share.
At the time, BP and Norsk Hydro stood by their own bookings, which equated to about 75% and 70%, respectively, of their shares in the field’s recoverable gas.
The discrepancy highlighted the differences among oil companies in the way they interpret SEC reserve-accounting guidelines. Reserves are the amount of energy a company expects to pump from the ground. The estimates aren’t reviewed by outside auditors, but they remain one of the most important indicators of an oil company’s health and future prospects.
In its SEC filing yesterday, Norsk Hydro cut its Ormen Lange bookings to about 49% of its stake in the field’s gas. It also cut reserves from other fields, trimming its total reserves booked by 6.6%.
BP, meanwhile, raised its total reserves by 0.1% from its annual report filed earlier this year with British regulators, though it said it is still discussing the reserves issue with the SEC. In a news release, BP said it bases its year-end estimates on British accounting guidelines, which differ from U.S. rules in the way they estimate energy prices to assess commercial viability of projects.
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