To What Extent do United Kingdom Companies Provide Oil and Gas Reserves Information Sufficient to Satisfy Statement of Recommended Practice Requirements?

Abstract

The uncertainty surrounding oil and gas reserves estimation and the cost of gathering reserves data discourage firms from disclosing sufficient data to satisfy SORP (statement of recommended practice) requirements, especially where oil and gas reserves disclosure is discretionary. However, the need to reduce agency cost and signal to stakeholders induces firms to disclose oil and gas reserves. The contrasting views on the rationale guiding the extent of disclosure were examined in this study. A sample was drawn from 83 United Kingdom (UK) oil and gas exploration and production companies listed on the London Stock Exchange. Appropriate statistical tools were used to investigate the extent of oil and gas reserves disclosure. The findings provide mixed results about the extent of disclosure to meet SORP's requirements. There was no particular evidence that UK oil and gas companies provide qualitatively acceptable oil and gas reserves quantity information. The observed varying degrees of disclosure in the market could be attributed to a discretionary regime that allows firms to determine how and when to disclose. Policy makers and industry regulators could find the results useful in assessing the current extent of disclosure compliance.Correspondence: Cosmas Ogobuchi Odo,

Risk disclosure behaviour: evidence from the UK extractive industry

“…The descriptive characteristics of the dependent and independent variables are found in Table 2. In regard to the dependent variables it was noted that in 62% of the company observations the reserve quantum was disclosed, consistent with Mirza and Zimmer (2001) in their Australian study and in the UK by Odo et al (2016). In regard to the quality of the disclosure the mean score was 2.7 (maximum disclosure score 7).…”

Extractive Industries Reporting: A Review of Accounting Challenges and the Research Literature

“…There are similar earlier studies within the US and within Australia showing high degrees of diversity with regard to E&E accounting (Gerhardy, ; Bryant, ). Furthermore, there are some international comparative studies in the areas of accounting and disclosure of reserves (Nichols, ; Odo et al ., ) and ESG reporting (Hardy and Frost, ; De Villiers and Alexander, ; Barkemeyer et al, ; Schneider et al ., ) which will be reviewed in separate sections below.…”

“…Odo et al . () empirically examine the reserve disclosure practices of UK firms and the extent to which they follow the OIAC recommendations on a sample of 20 UK oil and gas firms in 2009. Their findings suggest that 65% of the firms in their sample either meet or exceeded the disclosure recommendations promulgated by the SORP, 25% provided only limited disclosure, while 10% failed to disclose any reserves‐related information.…”

Impacts of reserve and decommissioning disclosures on value and performance of oil and gas firms listed in the UK

“…Stakeholders, such as investors and governmental agencies, require accounting disclosures for decision-making (Byard and Shaw 2003;De Abreu et al 2016). Given their significant cash flow effects, oil and gas reserves and decommissioning costs of oil and gas structures are significant for oil and gas companies (Odo et al 2016;OGA 2020a, b 1 ). However, companies may not disclose sufficient information on these two items (Standard and Poor 2007;Abdo et al 2017.…”

“…Several studies on accounting disclosures by oil and gas companies investigate oil and gas reserves disclosures (e.g., Cooper et al 1979;Dharan 1984;Lys 1986;Craswell and Taylor 1992;Boone 1998;Berry and Wright 2001;Mirza and Zimmer 1999;Berry et al 2004;Taylor et al 2012;McChlery et al 2015;Odo et al 2016). Studies-related decommissioning cost disclosures addressed compliance, quality, and limitations of such disclosures (e.g., Russell et al 1998;Ekins et al 2006;Rogers and Atkins 2015;Abdo et al 2017.…”