The Canadian Securities Administrators (CSA) has proposed new guidelines governing the annual reporting of oil and gas reserves for Canadian companies. The guidelines require disclosure of both Proved and Probable reserves and associated value; inclusion of Possible reserves information is optional.

Reserve disclosures are key criteria to establish relative company stock value. It is thus instructive to compare the CSA regulations to existing U.S. Securities and Exchange Commission (SEC) rules and further to guidelines endorsed by the Society of Petroleum Engineers (SPE).

The CSA mandates disclosure of Proved volumes and associated future net revenues using two economic criteria: a forecast cost and prices scenario ("forecast case") and a constant cost and prices sensitivity scenario ("flat case"). The SEC Proved reserve is comparable to the "flat case" Proved reserve quantities in most instances. The CSA guidelines for Probable and Possible reserves conform closely to the current SPE published criteria. While recognizing probabilistic reserve assessments, the CSA has adopted the SPE guidance that reserves should not be aggregated beyond the "field" level using probabilistic summations.

The CSA may allow so-called "cross-border issuers", those Canadian companies also listed on USA stock exchanges, the option to solely follow SEC constraints. SEC regulations specifically prohibit disclosure of Probable and Possible reserves in 10K filings but many U.S. companies refer to additional resource potential in "forward looking statements" in their annual reports. Canadian "cross-border issuers" may not have similar latitude.

Unique to the Canadian regulations are rules regarding establishment of an internal company reserves committee and use of a qualified independent evaluator to audit assessment procedures and assets.

Will the new CSA rules improve, or impair, the ability of Canadian companies to compete for investment dollars? Further, the Sarbanes-Oxley Act on CEO/CFO certification requirements may have some unique implications for Canadian oil and gas companies.

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