Exxon faces an SEC probe for the inflated value of an oil asset
ExxonMobil CEO Darren Woods
Kaieteur News – While the media in Guyana is kicking off a storm for the country’s sloth to examine billions of dollars in costs submitted by ExxonMobil for its operations here, a Wall Street Journal (WSJ) report published yesterday can kick the government action . Two journalists, Christopher Matthews and Emily Glazer, reported for the business-oriented American publication yesterday that ExxonMobil was the subject of an investigation by the Securities Exchange Commission (SEC), a powerful independent agency from the United States, tasked with maintain fairness and orderliness. of markets.
The SEC was set to launch its investigation after an ExxonMobil employee filed a whistleblower complaint, alleging that the oil supermajor inflated the value of an important petroleum asset in the U.S. Permian basin, according to WSJ. He noted that the U.S. whistleblower program, among other things, allows the whistleblower to receive a cut of any monetary penalty imposed.
Reportedly, whistleblower ExxonMobil CEO Darren Woods noted that he set unrealistic expectations for the company’s performance in the basin.
WSJ reported that in 2019, Woods said Exxon production in the Permian basin would increase to one million barrels a day, a big jump over the previous target of 600,000 barrels by 2024.
“No one I knew in the organization thought this was possible; the pressure to deliver Woods’ promise to the market was permeating the organization, ”WSJ quoted the whistleblower as saying.
The publication noted that the complaint states that several persons involved in the valuation process for the asset in question had complained during the 2019 internal assessment about the instructions they had received. It was reported that the thrust of the complaints was that some employees were strongly armed to use unrealistic assumptions to project or determine how quickly ExxonMobil could drill wells on site, as this would result in a higher value for the asset.
ExxonMobil had acquired Permian acreage in 2017 for US $ 6.6 billion, WSJ said, and by 2018, some Exxon management had pegged the net present value of the acre at US $ 60 billion. On the other hand, the Journal reported that some Exxon employees had produced an estimate in 2019 that was closer to US $ 40 billion, and that the whistleblower said this considered it to be taking longer than expected to drill wells in 2018.
But when employees presented the estimate to the development manager in Delaware, she instructed them to “claw back” some of the value by using more optimistic assumptions.
The complaint stated that when some employees produced the amendment requested by the manager, they named the file “This Is a Lie.”
The Journal reported that the development planners had ultimately estimated that the net present value of the asset was US $ 50 billion.
WSJ, which previously reported reporting disagreements about the valuation, said at least one of the complainants was fired, according to an individual familiar with the matter.
The Journal reported that a spokesman for the SEC declined to comment on the matter of an investigation. Similarly, Exxon spokeswoman Casey Norton reportedly declined to comment on that issue, as well as any employee’s performance question or reason for separation from the company.
It is said that it would only provide authorities with the 2019 assessment for the 2019 assessment, providing information showing Exxon’s drilling performance was higher than the drilling estimates.
Following the Wall Street Journal’s report, ExxonMobil released a statement yesterday that pegged “alleged” whistleblower allegations as “patently false.”
He said the employees alleged to have made the allegations “lack the breadth and depth of experience to understand how and why drilling curves are regularly reviewed as technologies improve and understanding of the resource base expands.”
To support this point, Exxon said its unconventional drilling performance has historically increased in short time frames as engineers and planners gather more data. He noted that multiple learning curves had been considered throughout the process, which took into account the demonstration of learning curve performance in other unconventional projects. Overall, the company stands by the statements it has made to its investors.