New York’s Attorney General Eric Schneiderman has started to investigate curious accounting methods at Exxon Mobil Corp. According to one source, the oil giant failed to record the value of the company’s oil and gas reserves amid a worldwide slump in oil prices.
A plunge of over 60 percent in oil prices has prompted several integrated oil producers across the globe to begin recording the value of the company’s assets. Exxon is the only major company that has not done this. Writedowns have taken their toll on the revenue of many companies in the wake of the price slump. In January, Chevron recorded $1.1 billion in charges. Independent company, Chesapeake Energy Corp, recorded an $853 million writedown for the valuation of its gas fields.
Schneiderman’s probe into Exxon has been ongoing, though the focus of the investigation has changed over the last year.
At first, Schneiderman was trying to figure out if Exxon had deceived investors about the many threats of climate change. In August, Schneiderman said to the New York Times that he was investigating the potential influence of a worldwide crackdown on carbon pollution upon the valuation of Exxon’s reserves and assets. “Our results are in accordance with the accounting and reporting standards of the SEC and FASB,” said an Exxon spokesperson to Reuters. The spokesperson added that Exxon’s financial outcomes are “not affected by any material impairments.”
In a February filing, Exxon reported that an evaluation of its major, unpredictable assets revealed future undiscounted cash flows related to such assets “substantially exceed” their original worth.
Brian Youngberg, an Edward Jones analyst said, “I really think nothing will come of it. The SEC, the auditors have had no issue with how Exxon Mobil and or Chevron report reserves,” he continued, “share prices are moving down just with oil and I think investors are not viewing this as having any potential impact.”
First reported by the Wall Street Journal on Friday, Attorney General Schneiderman is looking now at price assumptions Exxon utilizes to book its reserves.
Adjusted for inflation, the long-term price of oil since 1946 is nearly $40 per barrel. Exxon has long been open to using extremely low price assumptions and has always admitted to doing so.
In a report from analysts at Jeffries earlier in the month, a collection of integrated oil companies recorded assets that totaling $103 billion since the beginning of 2014. The brokerage added that it anticipated more asset impairments within the industry.
A spokesperson for the New York Attorney General, Eric Soufer, said he had no comment in response to the Wall Street Journal report.
Lamar Smith, chairman of the House of Representatives Science Committee, has aligned with the beliefs of many other Texan republicans. They’ve alleged that Schneiderman’s probe imposes on the free speech of the scientists who don’t believe that humans are responsible for the change in climate.
In early trading, Exxon’s shares were down 0.5 percent at $84.74. Through Thursday’s close, shares belonging to Exxon had dipped roughly 17 percent since the middle of 2014, compared to 32 percent dip in the broader S&P Energy index .SPNY during the same time period.