  The high level of risk and uncertainty in harnessing oil and gas reserves
poses an accounting dilemma in the reporting of reserves quantity information;
information which is critical and relied on by investors for decision making.
Different studies have indicated that reserves disclosure information is
fundamental to understanding the value of the firm. This study attempts to
contribute to the growing value relevance literature on reserves disclosures by
examining the value relevance of the components of oil and gas reserve quantity
change disclosures of upstream oil and gas companies in the London Stock
Exchange. Particularly, it investigates the relationship between average
historical share returns and changes in reserves from explorations,
acquisitions, production, revisions and sale. It also examines the value
relevance of the quality of these disclosures. Using archival data from LSE,
databases and annual reports, and applying a multifactor framework, the
empirical results suggested that changes in reserves as well as the components
of these changes where associated with share returns though insignificantly due
to the significant impact of oil price and longitudinal effect posed by
applying the measurement approach with utilizes historical returns. However,
the quality of reserves disclosures has a positively significant relationship
with share returns. The volatility and decline in oil price is also reflected
in both low average share returns at -0.4% and low average growth in reserves
at 8.94% for the last 8 years in the sector.
