Is SEC subpoenaing shale operators? Apparently yes.

A number of lawmakers have called on the Securities and Exchange Commission to investigate aspects of the natural gas E&P business, namely whether companies are reporting the financial viability of shales accurately.

The calls came in response to a series of stories The New York Times did in June about concerns expressed by some in the industry and government over the issue. It has prompted plenty of industry backlash, a bit of chastisment from the paper’s public editor, and a rebuttal from the editors behind the story.

According to an attorney in the Houston office of Fulbright & Jaworski, the SEC has pulled the trigger.

In a note sent to clients this week Gerard Pecht notes:

The Securities and Exchange Commission recently began serving subpoenas on shale gas companies. The subpoenas seek documents and information regarding the actual performance of shale gas wells against forecasted or projected performance, the propriety of decline curves for the wells, and the calculation and public disclosure of full-cycle margins.

I asked Pecht to talk about this more but he declined. I’ve also reached out to a number of shale producers but so far those that have responded have said they weren’t on the receiving end of the subpoenas.

An attorney with another law firm said some of their clients have received the subpoenas, however, but he wouldn’t say which ones.

Of course, if one gets an SEC subpoena they may be more likely tell shareholders first, not just one nosey reporter who happens to call.

In a note to clients, wealth management and equity research firm Baird notes that the reserves rules at the heart of the issue has only been in place for less than two years, having gone into effect at the beginning of 2010 in response to two reserves reporting scandals: one at Royal Dutch Shell that was started by a company whistle-blower and a case at Houston-based El Paso Corp. that led the company to restate five years of financials and take a $2.7 billion charge.

The Baird report notes that subpoenas are just an indication the SEC is looking seriously at an issue, but not necessarily conducting an enforcement investigation. If that were the case the SEC woudl issue Wells Notices.

Issuing subpoena’s to a large number of companies (if that’s indeed the case) isn’t exactly a surprise, says the Baird report:

“We view it as appropriate and expected for the SEC to evaluate compliance with new regulations if compliance is publicly questioned. A regulatory investigation may provide a clearer investment horizon than a “trial” in the press.”

Stay tuned…