Chronology of the independent reserves revision

Press Release 16/06/2006 07:00
  • At the Repsol YPF-Harvard Seminar, a forum for specialists and eminent members of the international oil sector

On 26 January last, Repsol YPF announced a downward revision of 1,254 million barrels of oil equivalent in its proved reserves of oil and gas, equivalent to 25% of total proved reserves booked at 31 December 2004. 

By indication of the Board of Directors, the Audit and Control Committee has made an independent revision of the facts and circumstances relating to this reserves cut. 

To this end, and in line with the best corporate governance practices of companies that, like Repsol YPF, trade on the New York Stock Exchange and are submitted to the control of the SEC (Securities and Exchange Commission), the Audit and Control Committee hired the US firm, King & Spalding LLP, as having adequate experience and means for the job, and not having lent their services to the company on a prior occasion which might prejudice the independence and objectivity required. 

Throughout these months King & Spalding has made an exhaustive investigation, with the full collaboration of the company, which placed at the disposal of said firm all the means and resources that were required of it. To prepare the final report, King & Spalding held over 120 interviews with over 75 individuals, including former employees and management staff, both in Spain and Argentina; field engineers, technical directors, engineering consultants and reserves auditors who had rendered services to the company. 

King & Spalding also collected and revised a large number of documents, more than 2 million pages, and had access to the files and documents contained in the computers of over 60 employees, who have cooperated with King & Spalding by giving their consent to such access. In addition, King & Spalding have had support in their task from other consultants and advisors from different spheres. For example, on the request of King & Spalding, the Audit and Control Committee hired KPMG LLP for the access and processing of IT data, and Netherland, Sewell & Associates Inc., consultants specialised in the oil sector, to obtain the necessary assessment on matters of a technical nature. 

The Committee also decided to hire the services of auditors Deloitte SL in order to analyse, in alignment with IFRS, the repercussions that the reserves cut might have on the companys accounting statements. 

Reserves Revision. History

April 2005

The Board of Directors Audit and Control Committee takes on new responsibilities, including the overseeing of reserves control." Creation of a Reserves Control Division, independent of the business, reporting directly to the Audit and Control Committee." By order of the Board of Directors, the Reserves Control Division proposed to the Repsol YPF Executive Committee that the independent consultants, Ryder Scott Company, should be hired urgently to collaborate in preparing an Internal Reserves Control Manual. 

June 2005 

The Audit Committee of the Board of Directors presented a Programme of External Reserves Audits and allotted this task to the independent auditors DeGolyer & McNaughton (D&M), Gaffney, Cline&Associates (GC&A) and Ryder Scott Company (RSC). 

July 2005

The Internal Reserves Control Manual was presented before the Board of Directors Audit and Control Committee. This manual was inspired by the sectors best practices, and takes into consideration the most recent SEC regulations. 

September 2005

The Internal Reserves Control Manual was approved by the Repsol YPF Executive Committee.September - December 2005" Training programme on reserves evaluation as per the new Manual (9 seminars, over 250 employees) 

January 2006

On 26 January, Repsol YPF announced a cut of 1,254 million barrels of oil equivalent in its total proved reserves as of December 2005, equivalent to 25% of the companys total proved reserves as of 31 December 2004. "The Board of Directors requested the Audit and Control Committee to conduct an independent review of the facts and circumstances relating to the reserves revision." The Audit and Control Committee resolved to hire the firm of King & Spalding LLP to conduct this independent review." The Audit and Control Committee decided to hire the services of the financial auditors, Deloitte, to evaluate the effect that such a cut in proved reserves might have on the companys accounting statements.

January June 2006

Throughout these months, King & Spalding has:Held over 120 interviews with more than 75 individualsCollected and revised more than two million pages "The Audit and Control Committee monitored the review procedure, holding meetings, video-conferences, etc. with King & Spalding" On 10 June, the King & Spalding report is presented to the Audit and Control Committee, with their conclusions about the revision process undertaken by the company." Deloitte also presented to the Committee its report on the accounting effects of this reserves cut." At the meeting of 14 June, the Audit and Control Committee resolved to:

  • Close the review procedure commissioned by the Board of Directors to the Audit and Control Committee.
  • Inform the Board of Directors of the procedure conducted and the reports from King & Spalding and Deloitte.
  • Propose that the recommendations in the report from King & Spalding be put into practice.