OIL & GAS ALERT: Changes in SEC Rules May Result in Greater Liquidity and Higher Valuations for Public Oil and Gas Companies

    1 January 2008

    Some recent changes in SEC rules may result in higher valuations for public oil and gas companies and greater liquidity for their securities:


    • The holding period for restricted securities issued by currently reporting public companies and held by nonaffiliates under Rule 144 has been shortened from two years to six months, without regard to volume or manner of sale limitations.


    • Effective January 28, 2008, smaller public oil and gas companies may use short-form Form S-3 for subsequent primary offerings, even if they have public floats of less than $75 million, provided that their shares are registered and listed on an exchange (including, among others, the Nasdaq markets), they sell not more than 1/3 of their shares outstanding in any one calendar year, and they meet the other eligibility requirements for Form S-3.


    • The SEC is re-examining, for the first time since the 1960s, the manner in which reserves are calculated for SEC purposes (which influences the valuation of these companies). It is expected that the revised manner of calculation will take into account new methods and technologies and thus increase the amount of reserves reported.


    Cumulatively, these recent changes in SEC rules are expected to be significant to public oil and gas companies.

    This Oil and Gas Alert provides only general information and should not be relied upon as legal advice. For more information, contact your Patton Boggs LLP attorney or the lawyers listed on this Alert.