In the first quarter of this year, Murphy Oil Corp. announced three dry holes, a revelation that was guaranteed to hit the company's quarterly earnings. But when Murphy's investor relations director, Kevin Fitzgerald, checked out the earnings forecasts at First Call a week or so later, one analyst hadn't revised his estimates. Fitzgerald asked the analyst if he had received the press release. He had but simply forgot to include the new information in his model. The analyst corrected his figures. Although the revised number wasn't favorable to Murphy, it was accurate, which was important to Fitzgerald. However, if a similar situation were to arise in the fourth quarter, Fitzgerald likely wouldn't repeat his actions, because of the Securities and Exchange Commission's new Regulation FD (Fair Disclosure). The regulation, which took effect October 23, attempts to put individual investors on an equal footing with analysts and institutions when it comes to receiving material information from publicly traded corporations. Though the purpose sounds clear enough, many details are open to interpretation. The ways in which corporations are dealing with the rule's vagueness vary wildly. Some are releasing floods of information. Others are virtually ceasing communications altogether. And still others fall somewhere in the middle. "Companies that were always fairly open are continuing that trend," says Michael Noonan, senior vice president of investor relations for Pierpont Communications in Houston. "The companies on the borderline or those that were uncomfortable speaking on their forward-looking projections have probably clamped up a little." Wall Street investment analysts are most likely to feel suffocated by Reg FD, observers say. They will lose much of the personal access they had to executives, and may even have to reduce the number of companies they cover, as information becomes more time-consuming to collect. "The larger securities firms with the clout of their investment banking groups, large staffs of analysts and in-house investor relations coordinators seem to be having the most problems," says Howard Christensen, president of Christensen & Associates, a Scottsdale, Arizona, investor relations firm. "They no longer get the calls first and with more detailed information; they now get in line with everyone else. The smaller firms are happy and excited about the change, which means they get the same information at the same time." Noonan says the analyst-management relationship has been strained in these early days of Reg FD, and the situation may affect the companies these analysts cover. "I think you will see some of the small- to midcap companies getting dropped." He adds, "I'm not going to blame everything on the new Reg FD for what's happening in the market. But analysts not being able to understand where a company is going during the short- or the long term has, I think, increased volatility in the marketplace." Fitzgerald echoes that sentiment. When he called the analyst who had forgotten about the company's dry-hole announcements earlier this year, the Murphy Oil official believed that getting the right numbers out in the open was a service to everybody. "But the way I understand the rules now, you can't make comments about earnings," he says. "That bothers me because I think you'll see a lot more volatility and a lot bigger spread in the numbers than there needs to be. And I can't see where that's gong to help anybody." James K. Wicklund, who covers oilfield service companies for Dain Rauscher Wessels in Dallas, laments that the access analysts now have is limited and predicts that volatility may increase as a result. "The problem is, companies are scared to death they're going to get sued if they say something to me that they don't say in a general press release. So, to be safe and not upset their attorneys, many are saying nothing to anyone." Guy Young, a partner with the Haynes & Boone law firm in Houston, has worked with numerous oil companies regarding Reg FD. These companies want to put out as much forward-looking information as possible to help guide the investment community, he says. But they also are worried about how quickly that information needs to be updated so that it doesn't become potentially misleading. "That would seem to be the biggest balancing act out there." He advises his clients to forge closer bonds between their investor relations and accounting departments so that the paperwork filed with the SEC and the press releases issued by the company more closely resemble each other. Sandra Ryan, director of investor relations for Coastal Corp., says that one of the bigger concerns she has heard is that any decision a company makes will be judged in hindsight by the SEC. For example, a company may decide that a certain piece of information is not material, and therefore does not fall under the confines of Reg FD. But if the company's stock price unexpectedly rises or falls after that decision is made, that company may be disciplined. "I think people are concerned that anything might be considered material, because everything is weighed in hindsight," Ryan says. Young says he expects the SEC to judge such questions of materiality with a certain level of understanding. "To be fair to the SEC, they've said they're not going to second-guess close calls when it comes to materiality, and I believe that's true. They may question it, but they probably won't bring action." In a few months, the dust should settle and companies will have a better idea of what information they should be releasing and how. "We will see some consensus-building," he says. "In the fourth quarter, we will see more similarities in what information is being released."

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