Reserves - better not blink or they could be gone
In a week of carnage among the UK listed E&P mid-caps, one of the more puzzling big fallers is Soco International. At the time of writing the stock is down nearly 40% from the start of the week as investors get to grips with a spectacular drop in 2P reserves, from 130mmboe to 41mmboe. However, this reeks of a potential over-reaction and a lack of understanding among much of the analyst community as to what reserves actually mean. We therefore think it is worth considering in this post what companies and independents auditors actually mean by the simple words “reserves”.
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Everything comes in threes
This week was not a good one. It has seen three major announcements by well-known London-listed oilers, resulting in week-to-date share prices falls of 20% for Cairn, 38% for Soco and 12% for Afren.