Exclusive: Whistleblower Accuses Exxon of ‘Fraudulent’ Behavior for Overvaluing Fracking Assets For Years
The write-down reduces the value of the assets on Exxon’s books. The announcement comes as part of the company’s fourth quarter earnings for 2020.
The fossil fuel giant, however, may be understating the financial damage to its assets, according to a former ExxonMobil employee turned whistleblower, Franklin Bennett. The oil major has overvalued its assets for years, according to Bennett and a team of advisors, a practice he describes as “fraudulent and defiant behavior” in a January 31 supplement to a whistleblower complaint he filed with the U.S. Securities and Exchange Commission (SEC).
Bennett and his team argue that instead, the company has been overvaluing its U.S. oil and gas assets by as much as $56 billion, as of year-end 2019.
At the root of the SEC complaint is ExxonMobil’s 2010 purchase of shale fracking company XTO Energy, which it acquired at the height of the natural gas boom for $46 billion. In the months and years following the acquisition, natural gas prices collapsed, and never returned to previous heights, rendering much of XTO’s assets uneconomic to produce.
Until now, ExxonMobil largely refused to take a meaningful write-down on those assets, despite several downturns in oil and gas market conditions. In particular, a deep natural gas price slide in 2015–2016, and another in 2019, hollowed out the valuation of many high-cost shale gas assets. Through it all, Exxon never took a significant write-down, which Bennett and his team argue is illegal.
In accounting terms, Exxon essentially told regulators that they could still get full value from the assets that they paid for in 2010, despite the deterioration in the natural gas market, claims the SEC complaint.
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