Guest post by David Middleton
First it was #ExxonKnew… Debunked here, here, here, here and here.
Then it was Exxon failed to inform investors of Schneiderman’s belief that Exxon’s proved reserves would be stranded by imaginary regulations… Debunked here.
Now, Schneiderman is going after Exxon for being too conservative in booking reserves…
Exxon’s Accounting Practices Are Investigated
New York attorney general’s probe focuses on why Exxon is only oil firm not to write down value of assets amid price rout
By
BRADLEY OLSON
Sept. 16, 2016 5:33 a.m. ET
New York Attorney General Eric Schneiderman is investigating why Exxon Mobil Corp.hasn’t written down the value of its assets, two years into a pronounced crash in oil prices.
Mr. Schneiderman’s office, which has been probing Exxon’s past knowledge of the impact of climate change and how it could affect its future business, is also examining the company’s accounting practices, according to people familiar with the matter.
An Exxon spokesman declined to comment about the investigation by the Democratic attorney general but said Exxon follows all rules and regulations.
[…]
Exxon hasn’t taken any write-downs—the only major oil producer not to do so—which has led some analysts to question its accounting practices.
The company has played down the criticism, saying it is extremely conservative in booking the value of new potential fields and wells. That reduces its exposure to write-downs if the assets later prove to be worth less than expected, it says.
[…]
Exxon Chief Executive Rex Tillerson told trade publication Energy Intelligence last year that the company has been able to avoid write-downs because it places a high burden on executives to ensure that projects can work at lower prices, and holds them accountable.
“We don’t do write-downs,” Mr. Tillerson told the publication. “We are not going to bail you out by writing it down. That is the message to our organization.”
Out of the 40 biggest publicly traded oil companies in the world, Exxon is the only one that hasn’t booked any impairments in the last 10 years, according to S&P Global Market Intelligence.
[…]
The company is known for its conservatism in recognizing the value of reserves, a practice that results in lower write-downs, said Sean Heinroth, a principal in the energy practice at management consultancy A.T. Kearney. Exxon is also known for rigidly interpreting regulations and sometimes pushing back against regulators if company leaders feel their practices follow the law, he said.
[…]
Exxon has previously faced a lawsuit over its impairment practices. Plaintiffs including the Ohio state pension system alleged in a 2004 class-action suit that the company’s failure to impair its properties undercut shareholders of Mobil Corp. in the 1999 deal that combined the companies.
The suit alleged that Exxon should have seen write-downs of between $3 billion to $7 billion in the late 1990s, another period of historically low prices. It included an allegation from a former Exxon insider that the company “operated under an order” by former Chief Executive Lee Raymond that “no impairment would be recorded.”
Exxon denied the allegations. The lawsuit was dismissed because the statute of limitations on such claims had passed.
I’ll address the last bit of nonsense first. The Ohio state pension system was suing ExxonMobil for something they claimed Mobil didn’t do prior to the merger. So, even if that lawsuit had any merit, it is 100% irrelevant to Schneiderman’s latest witch hunt.
Impairments and write-downs are bad, really bad… Unlike AGW, impairments and write-outs are actually worse than previously imagined. All publicly traded companies are required to have their financial and reserve reports audited. These reports are subject to very stringent SEC rules. The fact that ExxonMobil managed to get through the late-1990’s and 2008 price collapses without having to book impairments or write-downs ought to serve as a pretty good clue that they are extremely conservative in booking the value of their proved reserves.
It is way passed time for ExxonMobil to do what Chevron did…
Judge Rules in RICO Trial
U.S. Federal Court finds the judgment in Ecuador a product of fraud and racketeering.
Chevron is defending itself against false allegations that it is responsible for alleged environmental and social harms in the Amazon region of Ecuador. In February 2011, an $18 billion judgment—later reduced to $9.5 billion—was rendered against Chevron by a court in Lago Agrio, Ecuador, for alleged contamination resulting from crude oil production in the region.
On March 4, 2014, the U.S. District Court for the Southern District of New York ruled that the $9.5 billion Ecuadorian judgment was the product of fraud and racketeering activity, finding it unenforceable.
The nearly 500-page ruling (1.6 MB) finds that Steven Donziger, the lead American lawyer behind the Ecuadorian lawsuit against the company, violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), committing extortion, money laundering, wire fraud, Foreign Corrupt Practices Act violations, witness tampering and obstruction of justice in obtaining the Ecuadorian judgment and in trying to cover up his and his associates’ crimes.
The ruling prohibits Donziger and his associates from seeking to enforce the Ecuadorian judgment in the United States and further prohibits them from profiting from their illegal acts.
[…]
Schneiderman and his ilk are clearly engaging in fraud and racketeering activities.
Featured image borrowed from here.
Expect continued harassment from the likes of Schneiderman on as many fronts as possible. Activists are literally programmed robots who don’t have ‘stop’ button. All you can do is break the mother board.
Really, the only way Exxon can be rid of him is if they make a point to put him behind bars themselves. And that’s the sort of thing that really needs to happen as an example to all the other witch-hunters.
Hmmm. We need a Kramer-Sprenger award to go along with Pointman’s Climate Prat award. I would certainly nominate Schneiderman for 2016.
XOM could partner with other companies like ICE to move the stock exchange(s) out of NY. Dallas, Atlanta, or Houston would work. The banks would do well to leave also.
I’m boycotting NY as long as this nut job is in office.
Oil companies should boycott NY i.e. stop selling oil and oil products to NY until sense prevails.
I suppose by the time this is all said and done, New York Attorney General Eric Schneiderman will be investigating Exxon for felony typographical errors.
Mopery. Definitely Schneiderman will investigate ExxonMobil for felony mopery. And committing a nuisance.
Can you say ‘abuse of process?’ I knew you could.
Oh, definitely mopery… mopery with intent to creep, Jorge. And if Schneiderman loses that one, he’ll appeal it all the way to the Supreme Court.
(Talk about someone who’s in a hole and refuses to stop digging!)
I guess Exxon knows they will live longer than Schneiderman, and, in this matter, they have no need to lie for short term gaijins.
For those who don’t speak Japanese , gaijin means literally “outside person” And can have negative connotations loud , uncouth, barbarian etc, depending on the context it is used in.
Companies revaluation practices both up and down are always in the publicly available information. Any analyst or diligent investor will be aware of those practices and theoretical price valuations will be adjusted to take the company’s conservatism into account. This attack on Exxon by Schneiderman has morphed from ” alleged worthy cause” to personal vendetta.
Now this just drifted into blatant harassment by an AG off his patch and running out of bullets fast .
Let see external auditors ,internal auditors , the tax department , and shareholders …no problem,.. All are just a teensy bit more sophisticated than some lawyer panhandling for donations throwing handfuls of dirt.
Looks like he is scrambling to find something (anything ) that might be remotely be within his job description
having initially acted , while in the employment of tax payers , as a lobbyist for competing energy providers . Did people elect this joker ? Who is his boss ? Where is the little band of AG’s now ?
In the course of GAAP, Exxon uses independent reservoir engineers to do evaluations. They assume a well’s production will decrease. I recall when Phillips shutdown hundreds of stripper wells doing under 15 BPD when oil was down in the teens. Enron was in trouble for hiding Liabilities. Exxon assumes a large amount of gas and oil will not be pumped up. They assume Exxon is padding reserves?
The good news is as production rates fall, enhanced oil recovery technologies increase a well’s yield. I am thinking of a field with a company I won’t name that used CO2 flooding in the Permian Basin and jacked up production in an area by 17,000 BPD. I don’t know how this New York lawyer will come up with his own reserve estimates. I recall the mortgage meltdown. But many of those bundles traded at little discount of face value. Net present value. That case some co’s didn’t use risk managers. I have professional contacts that tell me who in the non majors had too much debt and questionable reserve estimates. My company offices are in a tower with a Petroleum Club. Most Independents started their careers with the majors and do farmouts.
I was in The Fairmont Hotel NOLA 1981 and the President of Mobil told me we would run out of oil in 12 years.
Price of oil is down. So are drilling costs per/day. So is the cost of leases. Drilling is down and a lot of leases expire.
As far as I’m concerned the price of oil should stay down. It helps the poor and the middle class (communist terms, by the way) Here is the price as of today:
http://www.bloomberg.com/energy
Much better than $140 USD per barrel, which it once was…
J.P.P.,
I’ve always wondered about that, too. When oil is $45/bbl that leaves a lot more left over compared with oil at $140/bbl, and the ones who benefit the most are the lowest wage earners.
But the President has a plan for that. Something about “skyrocketing”…
There is something suspicious about all of this.
Recently there have been a blitz of ‘news releases’ in MSM with absurd, but CAGW related claims, e.g.:
• “How Much Will Americans Pay to Battle Climate Change?“, by Sam Ori
• “New York AG Employs Powerful Law in Exxon Probe“, by Christopher M. Matthews
• “Exxon Accounting Under Investigation — Energy Journal“, by Neanda Salvaterra
• “Cocoa Production Could Be Devastated by Climate Change, Experts Warn“, By Katherine Dunn
• “Winemakers Toil to Beat the Heat of Climate Change“, By Mike Cherney
• “Companies Might Have to Disclose Their Carbon-Related Risks“, By Elena Cherney
• “A Price on Carbon May Be Coming Soon to the U.S.“, By Amy Myers Jaffe
This is just in the pages of WSJ. There have been a multitude of articles, all seeming to be published concurrently.
While prior to this, Schneiderman was getting slapped silly and reeling constantly as a result of his disastrous collusion with activist organizations followed by Democrat AGs falsely issuing subpoenas against XOM and skeptics.
All of a sudden, Schneiderman pulls a wabbit out of his sleeve and pushes an investigation against XOM’s accounting practices.
A turnaround that smacks of discussion, brainstorming, strategic planning, coordination and now execution. A combined effort to push alarmism and alarmists just prior to the election.
It strikes me that now is again a good time to hit a number of green authors, perhaps their editors and Schneiderman’s office with FOIA requests.
Any hints about recent Rockefeller, 350.org, etc., meetings or exchanges with Schneiderman? Someone is picking up the tab for all of these interactions and articles.
Schneiderman is riding on the wave of Deutsche Bank ‘scandal’. Instead of looking at Goldman Sachs, AIG, Freddie Mac and Fannie Mae.
Schneiderman is riding on the wave of VW ‘scandal’. Instead of looking at EPA regulations that hinders ANY auto builders to cope with.
His just a useless politically motivated carrierist.
The NY AG is in serious need of an invasive fact finding colonoscopy. Its an old NY playbook which was used to launch national careers for Dewey and others.
The current AG is going further afield to appeal to a national Progressive audience. One of his more recent predecessors Elliot Spitzee shook down Wall Street to gain the Governors mansion but was forced to resign in a prostitution scandal.
Interestingly he attempted to become a media flack ending that failed experiment on Al Gore’s Current TV. This AG needs the same.
/ anybody feel free to correct me where I’m wrong, incl. my denglish. /
The US AG covering New York state is doing the real law enforcement work in that part of the country.. He is closing in on the green wiener Governor with a wide ranging pay-to-play corruption probe of the states largest economic development projects. Particularly the game show named Buffalo Billion scheme anchored by none other than the imploding SolarCity company of Elon Musk.
In a brazen display of raw political hubris the Governor has begun his own investigation to muddy the waters and hamstring the federal probe. While the Governor continues to tout the green projects there is little sign that promises made to the public have or will be kept. Billions spent. Empty buildings constructed. Pockets lined. A few low paying security guard jobs to watch over the deterioration for the abused taxpayers.
Write downs are also tax write offs, which according to Liberal logic are evil tax subsidies. The hypocrisy of the Left has no bounds.
Such people endanger the economies of entire countries; sadly they find followers: in germany there’s already attempts to fine VW ‘like the Americans do’.
Alex Epstein, founder of Center for Industrial Progress who received a subpoena from AG Healy at the same time Exxon did sent a short response: “F*** OFF, fascist”.
http://dailycaller.com/2016/06/15/global-warming-skeptic-responds-to-massachusetts-ags-subpoena-fk-off-fascist/