February 19, 2008
SEC registrant Questar Market Resources, Inc. (Commission File No. 0-30321 - “QMR”), which is actively engaged in gas and oil exploration and production, offers the following comments on your Concept Release on Possible Revisions to the Disclosure Requirements Relating to Oil and Gas Reserves.
The Concept Release recites, among other matters, that the SEC’s current disclosure requirements for reserves reporting under Rule 4-10 of Regulation S-X were adopted in 1978 and 1982, whereas significant technological advancements have occurred in the intervening 25+ years including changes in oil and gas markets and in the types of projects in which companies may invest as well as the analytical tools (e.g., seismic interpretation, computer reservoir simulation) available to reporting companies. As a result, the appearance is that the SEC’s oil and gas reserves disclosure requirements have not kept pace with those changes. QMR agrees that changes in SEC’s proved reserves disclosure requirements are appropriate and, in that regard, we strongly recommend close scrutiny of and reliance upon the Society of Petroleum Engineers/World Petroleum Council (SPE/WPC) reserves/resources definitions and the related treatment found in their Petroleum Resources Management System (PRMS). This question is raised at Section VI.6 of the Concept Release. We believe the PRMS is an appropriate reflection of technological advancements subsequent to the SEC’s adoption of its requirements and definitions and that it should be a dynamic tool in the future.
Without going into a great deal of detail, we believe that the SPE/WPC treatment of appropriate prices and costs and its requirements for proven undeveloped reserves (PUD) provide flexibility to reserves reporting companies on a basis which is more consistent with the internal analysis being done by those companies in areas such as selection of well locations. For example, the SEC requirement to use, in calculating proved reserves, fixed prices and costs as of the date the estimate is made is unnecessarily rigid and does not reflect the sophisticated forecasting techniques available to reporting companies. This question is raised at Section VI.9 and 10 of the Concept Release. Similarly, the SEC requirement of near absolute certainty for PUD reserves at locations other than those which are adjacent to productive units unnecessarily limits the reserves which might otherwise be disclosed based on the sophisticated analytical tools available to reporting companies, and does not properly consider the characteristics of unconventional reservoirs. This question is raised at Section VI.7 of the Concept Release.
We look forward to the opportunity to comment on any draft rule-making which follows this Concept Release.