The US Se­cu­ri­ties & Ex­change Com­mis­sion (SEC) has reportedly launched an in­ves­ti­ga­tion into ExxonMo­bil af­ter an em­ployee filed a whistle­blower com­plaint al­leg­ing that the supermajor over­val­ued one of its core oil and gas asset.

The Wall Street Journal (WSJ) reported that sev­eral peo­ple in­volved in valu­ing a key as­set in the prolific US shale patch of the Per­mian basin com­plained dur­ing an in­ter­nal as­sess­ment in 2019 that em­ploy­ees were be­ing forced to use un­re­al­is­tic as­sump­tions about how quickly the com­pany could drill wells there to ar­rive at a higher value, ac­cord­ing to a copy of the com­plaint which was re­viewed by the newspaper.


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At least one of the em­ploy­ees who com­plained was fired last year, ac­cord­ing to a per­son fa­mil­iar with the mat­ter. The WSJ had pre­vi­ously re­ported that there had been in­ter­nal dis­agree­ments over the val­u­a­tion.

ExxonMobil spokesperson Casey Nor­ton de­clined to com­ment to the US daily on the ex­is­tence of an in­ves­ti­gation.

He said that, if asked by au­thor­i­ties about the 2019 as­sess­ment, the company would pro­vide in­for­ma­tion that shows its ac­tual per­for­mance ex­ceeded the drilling es­ti­mates.

Nor­ton also said that ExxonMobil does not com­ment on em­ploy­ees’ per­formance.

“We can­not com­ment on the rea­sons for an un­named employee’s sep­a­ra­tion from the com­pany,” he told the WSJ.

Eyes on Permian output growth

Un­der the SEC whistle­blower pro­gramme, in­di­vid­u­als who provide in­for­ma­tion that re­sults in a penalty can re­ceive a share of the mon­e­tary penalty.

ExxonMobil chief executive Darren Woods in early 2019 said the operator would increase its pro­duc­tion in the Per­mian to one mil­lion bar­rels a day as early as 2024, up from pre­vi­ous es­ti­mates of 600,000 bpd by 2025, noted the WSJ.

“No one I knew in the or­ga­ni­sa­tion thought this was pos­si­ble, the pres­sure to de­liver on Woods’ prom­ise to the mar­ket per­me­ated the or­ga­ni­sa­tion,” the whistle­blower said in the com­plaint.

Delaware sub-basin

Key to Woods’ goal of ramp­ing up pro­duc­tion on its Per­mian acreage is the Delaware sub-basin. Some ExxonMobil managers earlier touted the net present value of the Delaware to be some $60 billion, although some other employees subsequently estimated the NPV to be nearer $40 billion.

Ac­cord­ing to the whistle­blower com­plaint, the lower es­ti­mate re­flected, in part, that it took longer than ex­pected to drill wells in 2018.

Af­ter em­ploy­ees de­liv­ered the new num­ber to the Delaware de­vel­op­ment man­ager, she al­legedly asked them to “claw back” some of the lost value, ac­cord­ing to the com­plaint, by us­ing dif­fer­ent as­sump­tions, in­clud­ing a more op­ti­mistic “learn­ing curve” that es­ti­mated the rate at which they would im­prove drilling times, reported the WSJ.

Some em­ploy­ees ob­jected to us­ing the new learn­ing curve, which they viewed as un­re­al­is­tic, and one em­ployee sub­mit­ted the re­vised es­ti­mates in a file named “This is a Lie”, ac­cord­ing to the com­plaint.

The de­vel­op­ment plan­ners ul­ti­mately es­ti­mated that the NPV was $50 bil­lion.

ExxonMobil earlier told the WSJ that it was com­mon for disagree­ments to occur dur­ing plan­ning pro­cesses and that the company’s per­for­mance in the Per­mian has ex­ceeded ex­pec­ta­tions.

The com­pany is not known to have ever pub­licly dis­closed the Del­aware basin val­u­a­tion.