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The SEC staff’s comments around oil and gas reserves continue to focus on proved undeveloped (PUD) reserves and the use of third-party reserve reports. Specifically, the SEC staff frequently asks for additional information on:
  • the planned timing for the conversion of PUD reserves in regard to the Regulation S-X requirement that all PUD reserves be converted within five years. Once this information is provided, the SEC staff may then ask registrants to explain why they believe such reserves should continue to qualify as PUD when, based on the registrant’s information, development within five years appears unlikely; and
  • material changes to reserves, including disclosure of amounts attributable to each factor that resulted in changes and disclosure of the technologies used to establish the appropriate level of certainty for reserves estimates.

The SEC staff has also commented on compliance with mining reserve disclosures pursuant to Regulation S-K, such as requesting expanded disclosures concerning exploration plans and further information on categorization as proven or probable reserves. In addition, the staff has requested supplemental information that establishes the legal, technical, and economic feasibility of materials designated as reserves.
Comment Examples
Guidance references
  • Tell us whether there are any proved undeveloped reserves as of year end that are not scheduled to be drilled within five years of initial booking. If so, tell us the specific circumstances that justify a longer time. See Rule 4-10(a)(31) of Regulation S-X.
  • Your disclosure identifies multiple factors impacting your proved reserves without indicating the amount attributable to each factor. If multiple factors materially contribute to or offset changes in reported reserve quantities, indicate the quantity attributable to each factor.
  • Expand the discussion of the changes that occurred in your proved undeveloped reserves to include an explanation of the material change due to revisions other than price. Your explanation should address the overall change for the line item by separately identifying and quantifying the net amount attributable to each factor that contributed to the change, including offsetting factors, so that the change in net proved undeveloped reserves between periods is fully reconciled. In particular, disclosure relating to revisions in previous estimates for reasons other than price should identify such individual underlying factors as changes caused by well performance, improved recovery, or changes resulting from the removal of proved undeveloped locations due to changes in a previously adopted development plan. Refer to the disclosure requirements in Item 1203(b) of Regulation S-K.
  • To the extent that you disclose material additions to your proved reserves, expand your disclosure to provide a general discussion of the technologies used to establish the appropriate level of certainty for your reserves estimates. Refer to Item 1202(a)(6) of Regulation S-K.
  • Please forward to our engineer as supplemental information and not as part of your filing, the information that establishes the legal, technical, and economic feasibility of the materials designated as reserves, as required by paragraph (c) of Industry Guide 7. The information requested includes, but is not limited to: Property and geologic maps. Description of your sampling and assaying procedures. Drill-hole maps showing drill intercepts. Representative geologic cross-sections and drill logs. Description and examples of your cut-off calculation procedures. Cutoff grades used for each category of your reserves. Justifications for the drill hole spacing used to classify and segregate proven and probable reserves. A detailed description of your procedures for estimating reserves. Copies of any pertinent engineering or geological reports, and executive summaries of feasibility studies or mine plans including the cash flow analyses. Copies of any pertinent marketing studies. A detailed permitting and government approval schedule for the project, particularly identifying the primary environmental or construction approval(s) and your current location on that schedule.

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