Exxon Mobil ($XOM) Carbon-Cost and Reserve Valuation Case

The court has ruled on whether the plaintiffs are certified as a class.

3:16-cv-03111

Case number

02/24/2016

Class period Start

10/28/2016

Class period End

$XOM investors filed a claim against Exxon Mobil for allegedly telling investors its climate-cost modeling and reserve valuation practices were stronger than they were, while hiding losses, likely reserve de-bookings, and asset impairment issues tied to Canadian oil sands and Rocky Mountain gas assets.
After Exxon disclosed that nearly 20% of its proved reserves might no longer qualify at year-end, $XOM fell 2.46% on October 28, 2016.
$XOM investors can join this case to be notified about potential recovery.
Case Details:

Between March 31, 2014 and January 30, 2017, Exxon Mobil told investors it used a rigorous outlook and carbon-cost planning process to evaluate its reserves and long-term projects. Executives emphasized that none of the company’s hydrocarbon reserves would become stranded, that carbon proxy costs were embedded in planning and investment decisions, and that Exxon’s disciplined processes set it apart from peers taking write-downs.

However, during this period, investors allege Exxon Mobil’s public statements did not match what was happening inside the company. Exxon Mobil allegedly failed to disclose it used lower or no carbon proxy costs on some projects, including its Canadian bitumen operations, and did not apply those costs in impairment reviews until at least 2016, that its Canadian Bitumen Operations were losing money by mid-November 2015 and Kearl was headed for a reserve de-booking unless oil prices rose dramatically; and a significant portion of its Rocky Mountain dry gas assets was already impaired by year-end 2015.

Then, on October 28, 2016, the company revealed that nearly 20% of its proved reserves might no longer qualify at year-end, including about 3.6 billion barrels at Kearl and about 1 billion oil-equivalent barrels in other North America operations. 

$XOM fell $2.14, closing at $84.78. Additional revelations followed on January 31, 2017, including a roughly $2 billion impairment charge tied largely to Rocky Mountain dry gas assets and a signal that Kearl reserves would be de-booked. 

By February 1, 2017, shares had dropped to $82.94, representing a total decline of 4.6% over the correction period.

Based on these events, $XOM investors filed a claim against Exxon Mobil, alleging the company:
It misrepresented how it used carbon costs when valuing reserves and projects.
It hid that its Canadian bitumen operations were losing money and that Kearl was likely headed for a reserve de-booking unless oil prices surged.
It delayed recognizing impairment in Rocky Mountain dry gas assets, keeping reported asset values and reserve strength looking better than they were.
Investors argue Exxon Mobil misled the market about the value and resilience of its oil and gas reserves, causing losses when the truth emerged.

Case Type

US Securities Class Action

Case Status

Class Certification result

Alleged Offence

Misleading Statements,

Financial Misrepresentation,

Fraud,

Failure to Disclose,

Omissions

Suspected Party

Directors,

Management

Security Type

Stocks

Trade Direction

Long

Shock Event Date

11/09/2015

Filing date

11/07/2016

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