Hi clairence,Does such necessity exist as market prices increase as well?Yes. By definition, proven reserves means that the oil exists and that it is economically feasible to recover it and deliver it to market. So, when the price of oil goes up or down this necessitates a revision in the amount of proven reserves the company has.These adjustments aren't normally very large, though. Maybe 1 or 2% of all reserves.The rules for reporting reserves are currently being revised by the SEC and are due to be released shortly. They will become effective in January, 2010 (iirc) and its been reported that they will allow broader definitions of reserves. No longer will there only be "proven" reserves. Like Canada and some European countries, the US will now allow "probable" reserves - that is the quantity of oil in the ground that is likely to be recoverable and economical to do so - to be reported along side proven reserves.But from a fundamental standpoint, isn't it possible that this kind of mark-to-market activity is something of a gimmick? I'm afraid I haven't been very clear and I may be confusing things.Above, in this post, we are discussing the rules dealing with the definition of proven reserves and the impact changes in the price of oil (or nat gas) have on that volume.Mark to market is an accounting requirement that is totally seperate. What this reporting requirement says, essentially, is that if a company purchased an asset for say $1000 two years ago. And now, two years later, the prevailing market price of that asset is $500. The rule requires the company to post a loss of $500 and adjust the reported value of that asset on its balance sheet to the $500 current market value.Both items are applicalbe to COP, here, with the mark to market of the Lukoil investment being the lions share of the loss.The mark to market accounting requirement has been blamed by some for causing much of the current financial crisis and is one of many reason why banks are posting such huge losses lately. Whether or not the mark to market requirement is good or not, I'm not sure.One thing I do know, as an investor who relies on the balance sheet to give a more or less acurate picture of what the company owns and owes, I want it to reflect current market conditions. So, I'm inclined to agree and except mark to market accounting. It isn't perfect though. Nothing ever is.Rich
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