The Wall Street Journal: SEC Eyes Links Between Oil Reserves, Exec Pay -Consultant
By JOHN BIERS
Of DOW JONES NEWSWIRES
March 25, 2004 3:33 p.m.
HOUSTON -- The Securities and Exchange Commission is stepping up oversight of oil and gas reserves and asking new questions, including about any links between executive compensation and reserves, a leading energy consultant said Thursday.
"This is a new SEC, folks," Ronald Harrell, chief executive of Ryder Scott Co., told the Professional Society of Petroleum Engineers. "I've been consulting since 1964, and I've never seen this depth of inquiry."
Until the last month, Harrelll said he had not seen the SEC ask about the link between executive compensation and reserves booking, which is being examined in an investigation of Royal Dutch/Shell Group (RD, SC). Ryder Scott is a leading independent consultant that does reserves accounting.
Harrell said the agency has also begun asking detailed questions about how companies enlist third-party consultants, who within the companies pick consultants, how much the consultants are paid and the conditions under which they have been dismissed.
While it's common for companies to debook reserves, Harrell believes a restatement like those at Shell and El Paso Corp. (EP) are unprecedented. In a restatement, the company must revise its financial statement, sometimes going back several years.
Ryder Scott has provided consulting services to both Shell and El Paso, the two companies that have announced the largest revisions of reserves.