The brouhaha that developed following the reserve revisions by El Paso Corp. and Royal Dutch/Shell Group has turned into a “long overdue” discussion about producers’ oil and natural gas reserves, the CEO of Anadarko Petroleum Corp. said Monday.

Speaking at the Howard Weil Energy Conference in New Orleans, Jim Hackett called oil and gas reserves the “most important asset” of exploration and production companies. However, he told conference attendees that “we need to look beyond the current fevered pitch that is focused primarily on third-party engineering, by placing the majority of our attention and debate on the more important aspects of internal reserve estimation processes which are management integrity, external track records of reserve performance and the public disclosures of the companies in which we all invest.”

Hackett noted that there is “no cookie-cutter, one size fits all model the industry can use when it comes to measuring a resource that you can’t see or touch.” Instead, he suggested investors consider several factors, “such as the technical tension in a company’s internal review process, the diversity of its properties, its track record of production and reserve adds or revisions and how clearly management retains the responsibility and accountability for reserves estimates.”

Anadarko, he said, currently has 2.5 billion boe in proved reserves. Its non-price-related revisions over the past decade have averaged a positive 0.2% of estimated reserves. Hackett noted that Anadarko relies on an internal staff of more than 150 engineers and geoscientists that review every well in every field every year “so its risk of performance surprises are greatly reduced.”

“Significant” reserve additions and changes are reviewed by a five-member formal corporate Reserve Review Team that includes Anadarko’s chief engineer, chief geologist, manager of corporate reserves and economics, and a senior engineer. The fifth person on the team is a senior vice president from the petroleum consulting firm, Netherland, Sewell & Associates Inc.

“At the end of the day, the U.S. Securities and Exchange Commission and Anadarko’s investors, are going to hold Anadarko accountable for our reserve estimates — not an outside consulting firm,” Hackett said. “We have a comprehensive understanding of our properties and utilize a vigorous process with the right intellectual capital working on our reserve estimates. Because of these combined factors, we have considerable confidence in our numbers.”

He added that “everyone knows that not all reserves are created equal. How long PUDs (proved undeveloped reserves) stay on the books, where they’re located, their infrastructure requirements and their production-cost and sales-pricing structures all have important implications for the current value of those booked reserves. Hackett said that “reserve estimation and reserve quality issues are not going away, nor should they, since we’re talking about the most significant portion of a company’s valuation.”

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