An empirical study of the determinants of UK oil and gas voluntary disclosures

Significant market value of energy firms is derived from their physical oil and gas reserves, assets not recorded on their statements of financial position. This paper provides empirical evidence regarding voluntary disclosure of such reserves in line with UK SORP/OFR guidelines from both a quantitative and qualitative perspective. The paper seeks to inform the IASB’s on-going consideration of reporting of mineral resources. The researchers adopt an empirical analysis of the previously un-researched UK reporting environment. Listed companies are considered to evidence forms of reserve disclosure with a logistical regression approach to measure determinants of reporting. The risk associated with mineral reporting reserves is hypothesised as the key disclosure driver whilst controlling for other relevant variables. Motivations for disclosure are considered. The majority of firms disclosed reserve quantities in some form but only a minority disclosed in line with recommended practice. Quality of disclosure is more variable between companies. The findings indicate that a voluntary disclosure approach is ineffective, partially explained by agency related behaviour. Risk, proxied by stage of production, drives reserve disclosure showing that producer firms are more likely to disclose reserve quantum balances and of a significantly higher quality. The qualitative attributes of information reported have not previously been tested