Royal Dutch Shell Group .com
The Wall Street
Journal: BP Defends Method Of Estimating Oil, Gas Reserves
DOW JONES NEWSWIRES
June 14, 2004 4:30 p.m.
Posted
15 June 04
LONDON (AP)--BP Plc (BP) on Monday defended
its method of estimating oil and gas reserves, and said that its figures
wouldn't show a "material" change when it recalculates them for submission to
regulators in the U.S.
However, London-based BP left open the possibility that its reserves might
differ somewhat when it restates them in a filing with the U.S. Securities and
Exchange Commission later this month.
Reserves are a vital asset for most oil companies,
and firms have come under scrutiny for the way they estimate their reserves
since Royal Dutch Shell Group of Cos. (RD, SC) downgraded its oil holdings by
23%, or 4.47 billion barrels. Shell , BP's biggest hometown rival, made four
separate revisions of its reserves this year, shocking the markets and forcing
the resignation of several top Shell executives.
Although BP has its headquarters in the U.K., it is registered to do business
in the U.S. and must therefore file its annual financial statements and
details about its reserves with the SEC. BP listed its reserves at 18.3
billion barrels of oil and oil equivalent in its 2003 annual report.
"We are confident in the reserves numbers that were booked in our UK annual
report, and we are confident that these numbers are compliant with SEC
regulations in all material respects," a company spokesman said, speaking on
condition of anonymity.
BP plans to submit information to the SEC in a document known as a 20-F. In
its filing, BP will reconcile reserves currently booked under British
accounting rules with U.S. standards, which analysts say are slightly more
stringent.
BP has made 20-F filings for many years, but a person knowledgeable about the
filings said there have so far been no differences when the company reconciled
its reserves from the British accounting method to the U.S. system.
U.S. investment bank Goldman Sachs (GS) has warned that BP's reserve estimate
for the SEC might come in 3% lower than the estimate it made under British
rules - the UK Statement of Recommended Practice.
"We don't view either base of accounting as being superior to the other. They
are simply different," the bank said in an investor report it issued last
week.
The bank said a 3% difference in reserve estimates would probably have no
financial implication for BP but said that it could affect investor sentiment,
given the recent uproar over Shell . It was unclear how Goldman Sachs
estimated that BP's reserves might vary by 3%. The bank didn't immediately
return phone calls seeking an explanation.
Market reaction would depend on the size of any downgrade in BP's reserves,
said Deutsche Bank (DB) analyst J.J. Traynor, speaking from his office in
Edinburgh, Scotland. He agreed that a 3% downgrade would probably have little
impact.
Traynor added that BP has been clear about the standards it uses to calculate
its reserves.
"I don't think there's any big scandal here," he said.
BP shares fell 0.8% to close at 478 pence ($8.70) Monday on the London Stock
Exchange.