Exxon hints it may "de-book" 3.6 billion barrels of Kearl's bitumen reserves
Buried in the back of its third quarter earnings report, Exxon Mobil warned that it may not be able to include some of its reserves under current SEC (Securities and Exchange Commission) definitions.
The company released a statement noting "If the average prices seen during the first nine months of 2016 persist for the remainder of the year, under the SEC definition of proved reserves, certain quantities of oil, such as those associated with the Kearl oil sands operations in Canada, will not qualify as proved reserves at year-end 2016."
Exxon says 3.6 billion barrels of proved bitumen reserves at Kearl are currently being evaluated. The company says those barrels could be rebooked if oil prices recovery or operating costs decline. Another billion barrels of oil equivalent across North America are also affected. In total, as much as 20% of the company's total proved reserves could be eliminated.
Exxon says it "will perform an assessment of its major long-lived assets, similar to the exercise undertaken in late 2015, including North America natural gas assets and certain other assets across the remainder of its operations." However, the company says its booked reserves will not affect operations or future production plans.
Imperial Oil issued a similar warning in its third quarter results, noting it could be required to "de-book" approximately 2.6 billion barrels at Kearl and approximately 0.4 billion barrels of proved bitumen reserves at Cold Lake for similar reasons.
The New York Supreme Court recently ruled that Exxon Mobil and its accountants must turn over documents related to its climate change research and business practices related to asset valuation. Exxon has repeatedly stated it uses very low price assumptions when booking reserves, and therefore does not need to "unbook" reserves when oil prices are low. The company says it disagrees with the New York court ruling and will be appealing the judgement.