The US oil & gas industry grew across several categories in 2011, including a 38% increase in exploration and development spending, according to new analysis from Ernst & Young. Russell McCulley reports.
While total capital expenditures among the companies included in Ernst & Young's 2012 US E&P benchmark study were down 16% due to a fall in property acquisition, investment in identifying new resources and developing existing reserves rose to $106.1 billion in 2012, the study found. After-tax profits grew in kind, up to $45.6 billion in 2011 from $37.7 billion the previous year.
Ernst & Young compiled data from disclosure information submitted to the US Securities & Exchange Commission by the top 50 E&P companies, ranked by 2011 end-of-year oil & gas reserves estimates. The companies represent about 98% of total US oil reserves and 65% of gas reserves.
Those reserves also grew significantly in 2011: oil was up 9%, or 1.7 billion barrels, in 2011, with oil production up 3% over 2010. Gas reserves were up 4% and production increased by 9%. Combined oil & gas revenues grew 23% in 2011, largely due to the growth of onshore unconventional plays and the stabilization of oil prices following the volatility created by the global recession of 2008/9.
The combination of strong prices for oil and ever-improving technology has turned the US into a growth market. Marcela DonadioLong thought of as an oil region in decline, the combination of strong prices for oil and ever-improving technology has turned the US into a growth market, commented Marcela Donadio, Americas oil & gas sector leader at Ernst & Young. The tremendous success of oil production in the Bakken formation, for example, is a true testament to the domestic opportunity and the industry's ability to act on that opportunity.
The consultancy attributed the drop in total capex from $178.3 billion in 2010 to $149 billion last year in part to the fact that 2010 saw a handful of very large acquisitions, including the ExxonMobil-XTO Energy merger and Apache's acquisition of Mariner Energy. Proved reserve acquisition costs were $11.43/boe in 2011 and finding & development costs were $19.38/boe, both measures increasing 9% over 2010. Smaller independent operators led the growth in exploration & development spending with a 51% increase over 2010; large independents increased spending by 39% and IOCs increased spending in the US by 25%, Ernst & Young said. Almost all of the companies surveyed 96% increased capital spending budgets for exploration & development in 2011.
US production costs escalated in 2011, rising 27% as the costs for labor, services and other expenses grew by $5.8 billion and production taxes increased $3.9 billion.
Extensions and discoveries of 2.4 billion barrels the highest in five years helped push end-of-year oil reserves up 9% from 18.6 billion barrels in 2010 to 20.3 billion barrels in 2011, the study found. Developments in unconventional shale and tight gas plays boosted natural gas reserves 4%, to 178.2tcf in 2011.
Donadio called the year-over-year growth in US reserves impressive.
Increases in exploration & production budgets in light of new potential resources create a very positive outlook for future production potential, she added. OE
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