ConocoPhillips’ 2014 annual report said the metric showed how much more cash the company wrings out of every barrel of oil, while filtering out something it can’t control -- swings in oil prices.
“It’s not necessarily trying to mislead,” Brian Youngberg, an energy analyst at Edward Jones & Co. in St. Louis, said of the approach. ConocoPhillips’ tactic “shows if you can take price out of the equation, they actually are working toward improving their profitability per barrel for the things they control.”
Shivaram Rajgopal, an accounting professor at Columbia Business School, disagreed, saying the SEC was right to push the company to drop the measure.
“It’s preposterous in a commodity business to argue I am going to revalue my profits off last year’s oil price,” Rajgopal said. “They are going to live and die by the price.”