SEC launches probe of Exxon on Permian Basin asset valuation - WSJ

(Reuters) - The U.S Securities and Exchange Commission has launched an investigation of Exxon Mobil Corp , following a whistleblower complaint that the oil major over-valued a key asset in the top U.S. shale field, the Wall street Journal reported on Friday.

Reuters January 16, 2021 00:06:45 IST
SEC launches probe of Exxon on Permian Basin asset valuation - WSJ

SEC launches probe of Exxon on Permian Basin asset valuation  WSJ

(Reuters) - The U.S Securities and Exchange Commission has launched an investigation of Exxon Mobil Corp , following a whistleblower complaint that the oil major over-valued a key asset in the top U.S. shale field, the Wall street Journal reported on Friday.

Exxon Chief Executive Darren Woods has pinned much of the company's growth prospects on the Permian Basin in Texas and New Mexico, and two years ago pitted the company against rival Chevron Corp in a race to reach 1 million barrels of oil and gas per day in the field. The Exxon target grabbed the spotlight on the day Chevron was meeting with investors and analysts to make its own Permian case.

Woods told investors that Exxon could earn a double-digit returns in the Permian, even at $35-per-barrel oil.

Several people involved in valuing the Exxon Permian asset during an internal assessment in 2019 said employees were being forced to use unrealistic assumptions about how quickly the company could drill wells there to arrive at a higher value, the report said. (https://on.wsj.com/2LzpVjX)

Exxon and the SEC did not immediately respond to Reuters requests for comment.

Some Exxon managers in 2018 had initially pegged the net present value of the Delaware Basin in Permian at about $60 billion, the Journal reported in September.

But a few employees involved in Exxon's annual development planning estimated the value was closer to $40 billion in 2019, the WSJ report said.

When employees delivered the new number, they were asked to "claw back" some of the lost value by using different assumptions, including a more optimistic "learning curve" that estimated the rate at which they would improve drilling times, the report said, citing the whistleblower complaint.

Some employees objected to using the new learning curve, which they viewed as unrealistic, it said. The value was ultimately adjusted to about $50 billion, the report added.

At least one employee who complained was fired last year, the WSJ said, citing a person familiar with the matter.

The largest U.S. oil producer posted losses in the first three quarters of 2020 on an ill-timed spending increase that collided with a downturn in fuel demand and prices. To cope, the company has cut employees and project spending.

Exxon slashed 2020 spending in the Permian to about $3 billion from an original $7.4 billion budget, and said it would cut the number of drilling rigs working there from 55 to 15 or fewer.

Last month, Exxon also signaled a writedown of up to $20 billion, mostly related to its natural gas properties.

Exxon shares were down 5.4% at $47.58 in morning trading.

(Reporting by Jennifer Hiller and Rithika Krishna; Editing by Shinjini Ganguli and Dan Grebler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Subscribe to Moneycontrol Pro at ₹499 for the first year. Use code PRO499. Limited period offer. *T&C apply

also read

Robinhood now a go-to for young investors and short sellers
Business

Robinhood now a go-to for young investors and short sellers

By John McCrank NEW YORK (Reuters) - Robinhood, the online brokerage used by many retail traders to pile in to heavily shorted stocks like GameStop Corp, has made an ambitious push into loaning out its clients' shares to short sellers as it expands its business. The broker had $1.9 billion in shares loaned out as of Dec. 31, nearly three times the $674 million a year earlier, and it was permitted to lend out $4.6 billion worth of securities under margin agreements, around five times bigger than the prior year, according to an annual regulatory filing late on Monday

Wall Street mixed as Apple and Tesla retreat
Business

Wall Street mixed as Apple and Tesla retreat

By Noel Randewich (Reuters) - Wall Street was mixed on Tuesday, with Apple and Tesla losing ground, while materials and energy companies climbed as investors looked toward the U.S. Congress approving another stimulus package.

Biden's SEC nominee vows review of GameStop trading issues, climate disclosures
Business

Biden's SEC nominee vows review of GameStop trading issues, climate disclosures

By Pete Schroeder and Chris Prentice WASHINGTON (Reuters) - U.S. President Joe Biden's pick to head a key market regulator promised on Tuesday a thorough review of issues raised by the GameStop Corp stock frenzy and suggested companies may have to disclose their potential risks from climate change