The announcement, which accompanied the company’s release of another quarter of lackluster earnings, was an apparent reversal of Exxon Mobil’s stance in recent years.
The company has long insisted that it has been adequately accounting for the value of its oil and gas reserves — even as many other petroleum companies have taken big write-offs to reflect a two-year price slump.
On Friday, though, the company acknowledged that it faced what could be the biggest accounting revision of reserves in its history. Exxon Mobil might have to concede that 3.6 billion barrels of oil-sand reserves and one billion barrels of other North American reserves are currently not profitable to produce.
The way Exxon Mobil accounts for the value of assets still in the ground has made the company a target of inquiries by the Securities and Exchange Commission, as well as the New York attorney general, Eric T. Schneiderman.
Mr. Schneiderman, along with many energy experts, has criticized Exxon Mobil for being slow to take into account the impact of anticipated future government actions to curb Mr. Schneiderman, along with many energy experts, has criticized Exxon Mobil for being slow to take into account the impact of anticipated future government actions to curb climate change, which may force energy companies to leave at least some fossil fuels untapped in the ground.
On Friday, Exxon Mobil seemed ready to acknowledge that the value of its assets might change.
“We anticipate that certain quantities of currently booked reserves such as those associated with our Canadian oil sands will not qualify as proven reserves at year-end 2016,” Jeff Woodbury, Exxon Mobil’s vice president for investor relations, said during a conference call.
Mr. Woodbury added that if current price levels persist, other oil and gas operations in North America may have to be written down, although he indicated that they could also be put back on the books if prices recovered sufficiently.
In August the S.E.C. requested company documents and explanations about the value of Exxon Mobil’s reserves, but it has not publicly commented on its inquiry. Exxon Mobil has promised to comply fully with the agency’s requests and has expressed confidence that it has met its legal and accounting requirements.
The company has resisted Mr. Schneiderman’s broader investigation into its accounting and its past public positions on climate change. The New York attorney general contends that Exxon Mobil has misled the public, even as the company’s own scientists were warning about the climate impacts of greenhouse-gas emissions from fossil fuels.
Other oil and gas companies, including Exxon Mobil’s rivals Chevron and Royal Dutch Shell, have lowered valuations by more than $50 billion since oil prices plunged from over $100 a barrel in 2014 to the current price of around $50 a barrel.
In contrast, Exxon Mobil resisted write-downs, saying that it conservatively valued its assets on a long-term basis and that price volatility was normal in commodity markets.
Mobil’s oil sand reserves in Canada’s Alberta province are a prime target for a write-down because they are particularly expensive to mine. Investments in oil sands have been slowing, and several oil companies have given up on the resource. Turning oil sands into a usable form of petroleum requires heavy processing and refining.
Because Exxon Mobil’s earnings on oil and gas exploration and production have been in decline, said Brian Youngberg, a senior energy analyst at Edward Jones, “it is increasingly hard for it to demonstrate its reserves as economical in today’s world of more moderate oil prices.”
Read more at Exxon Concedes It May Need to Declare Lower Value for Oil in Ground
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