I have already warned you that if high quality financial statements from oil and gas companies are what you are looking for this year, you won’t find much of that in 2014 annual reports. In this post, I’m going to explain why all of the specialized O&G industry note disclosures will only add to the confusion.
Why Oil and Gas Accounting is a Mess in the First Place
Let’s back up a minute and review the accounting for oil and gas exploration and (E&P) activities. There may be no more extreme case of the failure of historic cost accounting to deliver relevant and timely information to investors.
One doesn’t need to know much about the oil business to be able to figure out right away that the most significant event in the existence of an E&P project comes in the very early stages: the discovery of oil. But you couldn’t [Read More...]