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Bloomberg: SEC Plans to Review Disclosure Rules for Oil and Gas Reserves

By Jesse Westbrook

Oct. 3 (Bloomberg) — The U.S. Securities and Exchange Commission will review whether energy companies give investors sufficient information about their oil and gas reserves after some firms overstated estimates.

The SEC named John Lee, a Texas A&M University professor, as its first academic engineering fellow, the agency said in a statement today. He will scrutinize energy reserves and recommend whether the SEC should revise its disclosure rules.

“I look forward to working with John Lee as we begin a review and evaluation of our current disclosure requirements,” John White, who heads the SEC’s corporation finance division, said in the statement.

Oil reserves, which investors use in assessing a company’s future earnings, have drawn scrutiny after revisions at companies including El Paso Corp. and Royal Dutch Shell Plc. Shell, Europe’s biggest oil company, agreed in 2004 to pay $120 million to settle SEC allegations that it overstated reserves.

The SEC defines oil and gas reserves as those that may be recovered from known reservoirs with “reasonable certainty.” Reasonable certainty means recovery of the underground oil and gas reserves is more likely than failing to extract them.

White, in the statement, said the SEC will evaluate the effectiveness of new technologies energy companies use to estimate reserves. Former SEC Chairman William Donaldson tried to make it a requirement that accounting firms audit oil and gas reserves in 2004 following concern that estimates were inadequate.

To contact the reporter on this story: Jesse Westbrook in Washington at [email protected] .

Last Updated: October 3, 2007 16:24 EDT

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