Why does the US SEC require companies to only publish proven reserves to investors?

The requirement for companies to publish only proven reserves is fundamentally anchored in the need for reliable and conservative estimates that are substantiated by current technology and methodologies. Proven reserves are those quantities of resources that geological and engineering data demonstrate with reasonable certainty to be recoverable under existing economic and operating conditions.

By focusing on proven reserves, companies offer a more realistic appraisal of their resource potential, reducing the risk of overstating their assets. This level of conservatism in reporting helps ensure that investors are making informed decisions based on the most credible assessments. Given the inherent uncertainties in resource exploration and extraction, relying solely on proven reserves mitigates the chances of misleading investors about a company’s actual capabilities and potential profitability.

This approach fosters transparency and trust in the financial markets, which are critical for maintaining investor confidence. When investors are equipped with accurate, reliable data, it enhances their ability to evaluate companies and make sound investment choices.