Exxon Is Being Investigated for Suspicious Accounting Practices

Key Speakers At 21st World Petroleum Congress
A logo sits illuminated outside the Exxon Mobil Corp. corporate pavilion during the 21st World Petroleum Congress in Moscow, Russia, on Monday, June 16, 2014. Work between Texas-based Exxon, the world's largest oil company by market value, and state-run Rosneft on Sakhalin Island in Russias Far East provides a template for further exploration, especially in the Arctic's Kara Sea, Exxon Mobil Corp. Chief Executive Officer Rex Tillerson said at the World Petroleum Congress in Moscow today.
Photograph by Andrey Rudakov—Bloomberg via Getty Images

New York attorney general Eric Schneiderman is investigating ExxonMobil (XOM) accounting practices and why the oil major hasn’t written down the value of its assets in the wake of a slump in oil prices, a person familiar with the matter said.

A more than 60% drop in oil prices has forced many integrated oil producers around the world to write down the value of their assets. Exxon is the only major producer holding out so far.


The focus of Schneiderman’s probe of Exxon has shifted over the past year.

After initially looking at whether the company misled investors about the risks of climate change, Schneiderman told the New York Times in August he was looking at the potential impact on the valuation of Exxon‘s assets from a global crack down on carbon pollution.

“Our results are in accordance with the accounting and reporting standards of the SEC and FASB,” an Exxon spokesman told Reuters, adding that the company’s financial results are not affected by any material impairments.

The company said in a filing in February that an assessment of its major risky assets showed that future undiscounted cash flows associated with such assets “substantially exceed” their carrying value.

“I really think nothing will come of it. The SEC, the auditors have had no issue with how Exxon and or Chevron (CVX) report reserves,” Edward Jones analyst Brian Youngberg said.

“Share prices are moving down just with oil and I think investors are not viewing this as having any potential impact.”

The news first reported by the Wall Street Journal on Friday indicates the N.Y. AG is now looking at price assumptions Exxon uses to book its reserves.

The long-term inflation-adjusted price of oil since 1946 is around $40 a barrel. Exxon has repeatedly said it uses very low price assumptions when booking reserves.

A group of integrated oil companies had written down assets worth $103 billion since the start of 2014, Jefferies analysts wrote in a note earlier this month.

The brokerage also said it expected more asset impairments in the industry.

New York attorney general’s spokesman, Eric Soufer, said he does not have a comment on the Journal report.

Exxon‘s shares were down 0.5 percent at $84.74 in early trading.

Up to Thursday’s close, shares of the company had fallen about 17% since mid 2014, compared with a 32% decline in the broader S&P Energy index during the same period.


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