New York state’s attorney-general is investigating ExxonMobil over its reporting of its asset valuations, widening the probe launched last year into the company’s disclosures on climate change.
Eric Schneiderman is looking into why Exxon has not followed its peers in the oil and gas industry in taking large non-cash charges for writedowns in the value of its assets, according to an individual briefed on the investigation.
Mr Schneiderman’s office would not confirm the probe, which was first reported by the Wall Street Journal.
The move builds on the attorney-general’s ongoing inquiry into whether Exxon misled investors and the public over the risks of climate change. Last year, he sent a subpoena to the company seeking emails, financial records and other documents going back to the 1970s, relating to the company’s statements on climate and its support for outside groups.
Exxon said in a statement that its results were reported in accordance with the standards set by the Securities and Exchange Commission, the financial regulator, and the Financial Accounting Standards Board, the private sector body that sets reporting rules.
In the oil and gas downturn of the past two years, many companies have taken non-cash charges for writedowns in the values of their assets, which have often run into the billions of dollars. Royal Dutch Shell, for example, took a charge of $8.2bn in October last year after writing down the value of its US shale gas assets, while Chevron in July announced a $2.8bn charge for writedowns.
However, Exxon said in a statement that it had valued its assets in accordance with reporting standards, and did not have to take any material charges as a result. It added that late last year it had assessed its main long-lived assets that were most at risk for potential impairment, and concluded that “the future undiscounted cash flows associated with these assets substantially exceed the carrying value of the assets”.
On Friday morning, its shares were slightly outperforming those of leading US rivals Chevron and Occidental Petroleum, suggesting investors were initially relaxed about the reports of the investigation.
Brian Youngberg, an analyst at Edward Jones, said investors generally paid “very little” attention to non-cash impairment charges.
“If you write down $1bn of reserves, it doesn’t mean you can’t produce that oil and gas somewhere down the road. It just means you can’t in today’s conditions,” he said.
As concerns have mounted about oil companies’ ability to finance their capital spending programmes while continuing to pay their dividends, investors have come to focus more on cash flows, which exclude asset writedowns, as the most significant indicators of financial health.
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