Stock exchanges around the world have rules for what you are allowed to tell prospective investors about how good your business plan expectations are.
Bloomberg have done an analysis of the recoverable reserves that shale oil and gas companies have told investors they have, as compared to how much reserves those same shale oil and gas companies have told the Securities and Exchange Commission they have.
As you can see from the chart, across the industry as a whole, the companies have told their investors that their reserves are five times bigger than what they have told the SEC.
No wonder investors have poured funds into this sector, expecting huge returns.
The SEC requires drillers to provide an annual accounting of how much oil and gas their properties will produce, a measurement called proved reserves, and company executives must certify that the reports are accurate. But no such rules apply to appraisals that drillers pitch to the public. Indeed, many company presentations remind investors that “publicly announced estimates are more speculative than the numbers the drillers file with the SEC.”
Nevertheless, as John Lee, a university professor who helped to write the SEC rules on reporting, puts it: “They’re running a great risk of litigation when they don’t end up producing anything like that [level of output]. If I were an ambulance-chasing lawyer, I’d get into this.”
You can read the full story on Bloomberg.
Or a very dismissive analysis of the whole situation on the more tabloid Daily Kos.