SEC Considers Ending Quarterly Reports for Energy Firms
Unless you’re an executive of an energy company that is privately owned, you don’t have to worry about filing quarterly financial earnings reports with the Securities and Exchange Commission.
Publicly-owned firms have to file the the Form 10-Q reports but things might change. Efforts are underway to eliminate the quarterly reports that have been required since 1970.
Proposed Shift to Semiannual Reporting
SEC Chairman Paul Atkins came out in support of switching from a quarterly reporting system to filing such reports on a semiannual basis, just like they do in the United Kingdom and the European Union. President Trump endorsed the idea in 2018 and the SEC at that time even asked for public comment at the time, but it never proceeded from there.
“Critics believe that more frequent reporting incentivizes
short-term thinking among management and investors. Similar criticism have been applied to the practice of earnings guidance. Yet, current reporting requirements have been attributed to greater transparency of information and a lower cost of capital for companies seeking to raise funds. This paper seeks to understand the sources of this disagreement,” stated the SEC in the 2018 request for comment.
The President again supported the idea after the Long-Term Stock Exchange asked the SEC in early September to consider allowing public companies to report earnings twice a year rather than four times. Atkins stated that the SEC will propose the change in rules to allow companies to decide on their own whether they would continue filing quarterly reports or convert to semiannual reports.
Oklahoma Firms Ready Quarterly Earnings
Just this week, several Oklahoma energy firms will be announcing their quarterly financial reports. Alliance Resources, the large coal-mining firm headquartered in Tulsa will be making its results known. On Tuesday, we can expect reports to be filed by ONEOK, Expand Energy and NextEra Energy. Both ONEOK and OGE plan conference calls on Wednesday where executives will discuss their financial results.
Sinclair will make its results known on Thursday and Mammoth Energy will do the same on Friday. Still more energy firms will release their quarterly reports next week including ONE Gas on Monday, November 3, Ovintiv and Gulfport Energy on Tuesday, November 4, Devon Energy on Wednesday, November 5. Gulfport wil lalso hold a Wednesday morning conference call to discuss the results. Conoco Phillips plans a release of its third quarter earnings report on Thursday, November 6.
Debate Over Transparency and Investor Access
Executives of some of those firms might be excited about the prospects of not having to file quarterly reports, if that comes to be. But others question such a move, noting that it would also mean a drop in information available to investors.
The form 10-Q allows investors to compare results to the previous quarter and to what occurred a year earlier. It generally does not include more detailed information such as is included in the annual form 10-K.
Others contend a switch to semiannual financial reporting to the SEC would mean less transparency and an increase in uncertainty. It might also make it more difficult to evaluate companies. Opponents of the switch also argue that less frequent information might increase the difficulty of making accurate forecasting of future performance.
Accounting firms might also see a significant loss in business in preparing and auditing quarterly reports. Others make the case that few formal meetings of boards of directors might result in a loss of information and insight into potential risks for the firms that switch to semiannual reporting.