The new U.S. Securities and Exchange Commission final rules and interpretations regarding its oil and gas reporting requirements are the first significant revisions since the adoption of the original reporting requirements almost 30 years ago. The revisions modernize the SEC’s oil and gas disclosure rules to better coincide with current industry practices so that they are more useful to the market and investors. Additionally, the SEC intended to more closely align the definitions with the standards endorsed by the Petroleum Resources Management System (PRMS).

The most significant changes to the reporting requirements include:

--The “economic producibility” of reserves shall be calculated using a 12-month average price, rather than a year-end spot price;

--The definition of “oil and gas producing activities” will now include “non-traditional” and “unconventional” sources, such as bitumen extracted from oil sands as well as oil and gas extracted from coal and shales;

--The previously undefined term “reasonable certainty” is now defined to mean “high degree of confidence” to better align with the PRMS definition;

--The “certainty” test for proved undeveloped reserves beyond one offsetting drilling unit is replaced with a “reasonable certainty” test;

--The type of technologies that a company may use to establish reserves estimates and categories is broadened by the adoption of the new definition of “reasonable technology;”

--Optional disclosure of “probable” and “possible” reserves is now permitted; and

--Additional disclosures will be required regarding the company’s chief technical person overseeing the company’s overall reserves estimation process and the filing of third-party reports (such as independent petroleum engineers’ reports) when a third party has estimated or audited the company’s reserves.

The full report: These changes are discussed in greater detail, including worksheets, in the full, 12-page report, “SEC Issues New Oil and Gas Disclosure Rules, Gives Transition Guidance,” at http://www.mayerbrown.com/energy/article.asp?id=6212&nid=10908. Click through to review.

About the authors: Scott J. Davis (312-701-7311, sdavis@mayerbrown.com), Marc Folladori (713-238-2696, mfolladori@mayerbrown.com), Robert F. Gray (713-238-2600, rgray@mayerbrown.com), William Moss (713-238-2649, bmoss@mayerbrown.com), Raj Sharma (713-238-2731, rsharma@mayerbrown.com) and Kevin L. Shaw (713-238-2665, kshaw@mayerbrown.com) are partners with the law firm Mayer Brown, which has some 1,000 lawyers in the Americas, 300 in Asia and 500 in Europe.