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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsRex Tillerson's Exxon-Mobil has been under formal investigation by the SEC since August
Most of the commentary over Donald Trumps presumed secretary-of-state nominee Rex Tillerson concerns the Exxon Mobil CEOs closeness to Russia, and Senate Republican discomfort with that relationship. But Trump and Tillerson share something else that hasnt gotten as much attentiona penchant to rip off their business partners.
In ExxonMobils case, Im talking about shareholders. Tillersons company has been under formal investigation by the Securities and Exchange Commission since August for failing to accurately value its proven oil reserves.Those reserves are critical to investors for assessing the future viability of the company. Without the certainty that the company can keep crude oil flowing decades into the future, ExxonMobil stock would plummet. Rewriting the disclosures to investors with lower valuations would cost the company billions of dollars. And actually the entire oil and gas industry would be affected by a new standard rather than the current ad hoc system.
The investigation is a kind of companion piece to the Exxon Knew campaign, which charges that the worlds largest publicly traded oil company was aware of the catastrophic effects of climate change nearly 40 years ago, but lied to shareholders about these risks to its business model. Attorneys general in over a dozen states have opened investigations into these matters.
But the SEC probe goes further. The agency requested documents from PricewaterhouseCoopers, ExxonMobils auditor, looking at how the company accounts for future costs from global climate regulations. If it becomes more costly to initiate drilling because of the so-called price of carbon, or regulations that mandate reductions to greenhouse gas emissions, Exxon might have to shelve the projects, taking a hit to future profitability. Even if the United States dumps the Paris climate accord (something a Secretary of State Tillerson may be in position to influence), Exxon does business worldwide, including with countries who would be likely to stay in the pact and work to cut emissions. Public companies must account in their financial disclosures for knowable risks to investors, and climate regulations would certainly fit the bill for an oil giant.
The SEC also wants to know why ExxonMobil does not write down the value of its reserves when oil prices drop. The crash began two years ago; a barrel of oil fetched $115 in June 2014, but under $28 by February. Even with the recent announcement of OPEC production cuts, the price has barely crested $50. But ExxonMobil never factored that loss into its calculations of future reserves; by contrast, Chevron has written down $50 billion. Exxon said in October it could de-book about 20 percent of its reserves if prices remain low, but it hasnt done it yet.
the rest:
https://www.thenation.com/article/potential-secretary-of-state-nominee-rex-tillerson-has-an-sec-problem/
chimpymustgo
(12,774 posts)Any chance the SEC can wrap up this investigation before 1/20?