Things have not been going well lately for Houston-based El Paso Corp., as noted earlier here, here and here. Accordingly, yesterday’s announcement that the U.S. Securities and Exchange Commission has launched an investigation into El Paso’s downward restatement in natural gas reserves earlier this year comes as no surprise.
El Paso’s share price has slumped 23 percent since the company last month slashed its proven natural gas reserves by 41% and announced that a financial restatement going back to 2001 was likely. El Paso has already taken a $1 billion write-down with the possibility of an additional $1.5 billion looming. The audit committee of the company’s board has launched an investigation by an outside law firm into the reserves cutback, and the outside investigation prompted El Paso two weeks ago to delay indefinitely the release of its fourth quarter results and annual report.

Royal/Dutch Shell finally was able to enjoy some good news yesterday with this announcement of a breakthrough deal with Libya’s state oil company to explore for oil and natural gas that could give Shell access to as much as $1 billion worth of oil and gas in North Africa. The deal establishes guidelines for oil and gas exploration projects, including onshore exploration and the export of liquefied natural gas. It was the first time in 30 years that Shell had been invited to operate in Libya.
Libya, which is a member of the Organization of the Petroleum Exporting Countries, has production capacity of about 1.6 million barrels a day. However, Libya’s reserve potential is far larger. Those reserves have been largely untapped because Libya’s infrastructure suffered from a chronic lack of investment over the past decade after economic sanctions were imposed in 1992 as a result of the Libya’s role in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland.