Washington (Platts)--29Dec2008

The US Securities and Exchange Commission approved new reporting rules
for oil and gas reserves Monday, marking the first change in those rules in 25
years, but it won't be soon enough for many firms that will have to write down
the value of their reserves because of the collapse in energy prices in the
second half of 2008.

The new rules do not take effect until January 1, 2010.

Most significantly, the new rules would allow companies to value their
reserves using a yearly average market price, rather than a one-day market
price.

"The use of the average price will maximize the comparability of reserves
estimates among companies and mitigate the distortion of the estimates that
arises when using a single pricing date," the SEC said Monday.

The SEC's current regulations were adopted from the Department of
Energy's 1978 guidelines for calculating reserves. Currently, producers can
only report proved developed reserves and must value them based on one price
point during the year--most commonly, the December 31 Henry Hub spot price for
gas and the West Texas Intermediate price at Cushing, Oklahoma, for crude.

Companies will also be allowed to report probable and possible reserves
as well as proved reserves to investors.

When the new rules were proposed in December 2007, SEC Commissioner
Kathleen Casey called the current rules a relic, like "An eight-track tape."

The new technologies allowing more recovery from shale plays are also
recognized in the new SEC rules, the commission said, allowing resources that
can be exploited by proven technologies to be reported as reserves. That
provision will have the most impact on oil sands producers, which previously
could not report any of their resource holdings as reserves.

"In the more than a quarter century since the SEC last reviewed its rules
in this area, there have been significant changes in technology that have
increasingly limited the usefulness of current disclosures to the market and
investors," SEC Chairman Christopher Cox said.

"These updates to the SEC rules will help ensure more meaningful and
comprehensive disclosure of information that, even though it does not appear
on a company's balance sheet, is of significance to investors in making
informed investment decisions," he added.

The rules change doesn't come in time for companies that may have to
write down the value of their reserves because of the collapse in energy
prices in the latter half of 2008.

The January NYMEX contract rolled off the board Monday at $6.136/MMBtu,
foreshadowing the end of December's spot price with which it usually
converges.

Henry Hub recorded a spot price of $5.805/MMBtu on Monday, 18% below the
$7.095/MMBtu recorded at the end of 2007.