Thread regarding ExxonMobil Corp. layoffs

19. E.C. Probe Of Exxon Renews Focus On Company’s Resistance To Write-downs

16 January 2021
Forbes
Scott Carpenter Senior Contributor

https://www.forbes.com/sites/scottcarpenter/2021/01/16/sec-probe-of-exxon-renews-focus-on-companys-resistance-to-write-downs/?sh=567167982982

The U.S. Securities and Exchange Commission opened an investigation into Exxon XOM +0.9%Mobil for possibly overvaluing one of its key oil and gas properties in the Permian Basin, the highest-producing oil field in the U.S., after an employee filed a whistleblower complaint last fall, according to a report in the Wall Street Journal on Friday that sent the oil major’s market value down 5%.

In 2019 several people complained during an internal assessment that employees were being forced to use unrealistic assumptions about how quickly the company could drill wells in the Permian to achieve a higher value, reported the Journal, which reviewed a copy of the complaint.

Citing unnamed sources, the article reported that the SEC had begun investigating the allegations after it received the complaint. The SEC declined to comment for the story.

The oil and gas property in question, in the Delaware Basin of the Permian, forms a key part of Exxon's plan to ramp up shale production. In 2017 it paid $6 billion for 275,000 acres of land that at the time produced just 18,800 barrels per day, though Exxon insisted that there were 60 billion barrels of oil beneath the ground.

Even before the Covid-19 pandemic, which turned 2020 into a catastrophically bad year for Exxon and big other oil companies, Exxon’s ambitions to boost its oil production were coming under pressure. Investors were already beginning to sour on shale oil and gas as other big energy companies flirted with green energy.

This isn’t the first time Exxon has been accused by critics of overvaluing assets. In late June one of the same two Wall Street Journal reporters with Friday's scoop reported that a former senior Exxon accounting analyst, Franklin Bennett, had filed a complaint under the S.E.C.’s whistleblower program claiming that Exxon had deceived investors by not writing down the value of XTO Energy, a natural gas drilling company it bought a decade ago for more than $30 billion. That article said other complaints had been filed but it didn’t identify who filed them.

Exxon has gained a reputation for refusing to write down the value of its oil and gas holdings even as peer oil companies take large write downs in response to falling oil prices. Even in response to 2020’s oil market destruction, Exxon didn’t say it would write down assets until late November, reassessing the value of its holdings down by $17 billion to $20 billion, its biggest impairment ever, long after most other majors had lopped off large chunks of value from their holdings.

Exxon says that it values its assets over the very long run, ignoring market fluctuations that may temporarily cause the outlook for oil to sour. Born from John D. Rockefeller’s Standard Oil monopoly, it has been around for more than 130 years. Today its well-worn refrain to doubters is that the developing world is consuming more and more oil and gas and Exxon stands ready to provide, no matter the vicissitudes of Covid-driven routs and other big price jumps. (Last year, oil futures prices briefly turned negative for the first time ever.)

But this time could be different. The Covid-induced economic crisis is looking more and more like a watershed event in the world’s evolution toward green energy sources like wind and solar and toward electric transport. It has already convinced BP, which takes a similarly long view of energy markets, to begin overhauling its operations and to permanently lower its global oil consumption projections.

Nor do most shale oil executives see an oil rebound in the works in the near term. A recent survey of shale oil executives by Kpler, a research outfit, found that the average WTI price used to plan for capital expenditures in 2021 was $44 per barrel. The closing price of WTI on Friday was roughly $52 per barrel.

The OP is definitely a White Card Troll

@ndt+1aA7SsV

Sigh, rehashing this old beaten horse. It matter none whatsoever what a technical advisor or manager at EM thinks about future costs or reserves. They are estimates, and EM can produce hundreds of employees and industry experts who will back the company's position. In the end, neither will be completely correct. Learning curves are an accepted industry and SEC practice for predicting future costs and resulting economic basis for reserves bookings. Sometimes savings from learning curves are overestimated, sometimes underestimated, just like reserves. It's an educated guess by all parties, well within reasonable ranges of uncertainty.

Another hail Mary by the trolls. Maybe we should use Benford's Law?

Hard to believe that an XOM employee feels so much pressure that they have to send an email with a file marked "This is a Lie" to their management according to the Wall Street Journal. I guess the pressure increases when $60 billion Permian book value is revised to $40 billion before compromising on $50 billion.

According to the WSJ, Exxon managers determined the net present value of the Delaware Basin, Exxon’s most promising Permian Basin area, at about $60B in 2018. According to the whistleblower complaint, in 2019, employees in the company’s development plan estimated the value closer to $40B after adjusting for longer than expected time to drill wells in 2018. After submitting the revised estimates, a manager allegedly asked the employees to “claw back” some of the value and use a more optimistic “learning curve” that some employees viewed as unrealistic. In response, one employee submitted the revised estimates in a file named “This is a Lie”, and the development planners’ final estimate recorded net present value at $50B.

Some actual news

ExxonMobil said today it made an oil discovery at the Uaru-2 well in the Stabroek Block offshore Guyana. Uaru-2 will add to the previously announced gross discovered recoverable resource estimate for the block, which is currently estimated to be approximately 9 billion oil-equivalent barrels. Drilling at Uaru-2 encountered approximately 120 feet (36.7 meters) of high quality oil bearing reservoirs including newly identified intervals below the original Uaru-1 discovery. The well was drilled in 5,659 feet (1,725 meters) of water and is located approximately 6.8 miles (11 kilometers) south of the Uaru-1 well.

Try again. So desperate. LOL

Georgetown University:
Unfortunately, my analysis shows that Benford's Law is an unreliable tool. And, as one applies more sophisticated methods of estimation, the results become increasingly inconsistent. Worse still, when compared with observational data, the application of Benford's Law frequently predicts fraud where none has occurred.

Another one bites the dust!