SEC launches probe of Exxon valuations in Permian Basin

Exxon Mobil Corp. shares took a hit last week after a newspaper report said the company is being investigated by the U.S. Securities and Exchange Commission for allegedly overvaluing a key asset in the Permian Basin.

The probe stems from a whistleblower complaint that during a 2019 internal assessment workers were forced to use unrealistic assumptions about how quickly wells could be drilled to reach a higher valuation, the Wall Street Journal reported, citing people familiar with the matter. At least one of the workers who complained was fired in 2020, the Journal said.

The probe may cast a shadow over Exxon’s efforts to turn a corner after its shares posted their worst annual performance in 40 years in 2020 amid a collapse in oil prices. CEO Darren Woods has been forced to slash spending, and last month the company said it will write down the value of North and South American natural gas fields by as much as $20 billion.

It’s not the first time Exxon has been investigated by the SEC over how it values assets. In 2016, Exxon was questioned by the regulator about why the company appeared immune from the multibillion-dollar write downs affecting the rest of the industry. The issue was resolved without any action being taken.

The SEC requires oil companies to report with reasonable certainty the volume of reserves in wells that are profitable at a price set by the agency the year before.