Locator: 50070HONDA.
2012 (bought in late 2011) Honda Civic:
As E&Ps release a flood of year-end results, investors, analysts and industry observers scrutinize annual reports to compare the performance of upstream oil and gas companies. Yet, despite operating in the same shale basins, drilling similar wells and facing the same commodity price environment, some producers report markedly different financial results that are often not driven by geology, operational execution or management strategy. Instead, they stem from accounting methodology, specifically from whether a company uses the Full Cost (FC) or Successful Efforts (SE) method to account for its oil and gas properties. In today’s RBN blog, we explain why this seemingly mundane topic really matters.
Reading about accounting methods may not seem super exciting, but it’s not that much different than filing taxes. Every spring, millions of us sit down with our W-2s and yet two households earning almost identical money can report far different taxable income because of accounting rules — exactly what happens with upstream oil and gas companies, too. These rules are essential to understanding how oil and gas producers are doing financially and otherwise.