When the SEC finalized its new oil and gas disclosure rules for effectiveness commencing December 31 of this year, many hailed the new oil and gas reserves definitions as being much more in line with industry standard reserve categories. It was initially widely believed that the SEC’s revised definition of proved reserves would justify labeling substantial additional oil and gas volumes from future development wells as “proved,” the gold standard of oil and gas reserve categories.

While some aspects of the new proved reserves definition may indeed be liberating, it appears the enthusiasm for booking substantial additional proved undeveloped reserves, or PUDs, under the new SEC definitions has waned somewhat in light of recent SEC staff interpretations and statements. PUDs typically represent proved reserve estimates from development wells to be drilled on future drilling locations. The most significant limiting interpretation the SEC staff is pressing is a hard-to-rebut restriction on recognizing PUDs scheduled for drilling more than five years from the date of original booking. In fact, many are now concerned about the potential under the new definitions for significant write-offs of previously booked PUDs. New pricing rules effective for 2009 year-end SEC reserves may also limit reserve additions. Read the entire article here.  

This Energy Currents E-communication updates our prior E-communication, "SEC Modernizes Oil and Gas Disclosure Rules." For more information about these topics, please contact Vinson & Elkins lawyers Mark Kelly, Alan Baden, or James Prince. Visit our website to learn more about Vinson & Elkins’ Energy, Capital Markets and Securities, and Securities Litigation and Enforcement practices.