Exxon Mobil Corp. disclosed the deepest reserves cut in its modern history as prolonged routs in oil and natural gas markets erased the value of some North American fields.
3.3 billion BOE was removed from the proved reserves category in Exxon’s books, the Irving, Texas-based explorer said in a statement. The revision, triggered when low energy prices made it mathematically impossible to harvest those fields at a profit in the near future. The biggest cut came from de-booking the entire 3.5-billion barrel Kearl oil-sands project in Canada.
The change amounts to the largest annual cut since at least the 1999 merger that created the company in its modern form, according to data compiled by Bloomberg. The previous record cut was a 3 percent reduction taken during the height of the global financial crisis in 2008.
Exxon, facing a U.S. Securities and Exchange Commission probe into how it valued its portfolio amid the worst oil market collapse in a generation, signaled in October and again last month that the revision was probably coming.
The equivalent of 800 million barrels in other North American fields beyond the Kearl were also removed from proved reserves. Those reductions were partially offset by new reserves from acquisitions and investments in the U.S., Kazakhstan, Papua New Guinea, Indonesia and Norway.
Reserves are a key metric watched by investors because they are an indicator, along with commodity prices, of future cash flow. When the 2008 reserves cut was announced in February 2009, Exxon shares lost more than 4 percent in a single day, wiping out almost $17 billion in market value.
Under SEC rules, proved reserves can only include oil and gas fields that can be produced economically within the next five years Price trends from the previous 12 months are compared against the estimated cost to harvest crude and gas in determining which reserves are counted.