Andersen says N. American drilling will continue climbing in 2002


Sam Fletcher
OGJ Online

HOUSTON, July 31 -- North American exploration and development drilling likely will continue increasing into 2002, barring a large drop in commodity oil and gas prices for an extended period, officials said Tuesday at Andersen -- the industry consulting firm formerly known as Arthur Andersen -- in Houston.

Major and independent oil and natural gas producers show "a renewed interest in exploration and production investments in North America," said Victor Burk, managing partner for the energy and utilities industry, at a press briefing for the company's annual report on global exploration and production trends. The US and Canada accounted for 44% of all exploration and development spending last year by 155 publicly traded producers, up from 34% in 1999, he said.

However, the ramp up in North American drilling activity "is testing the capacity of the contract drilling and oilfield services sectors in terms of availability of equipment and people, resulting in increased prices," Burk said.

Meanwhile, he said, "Mergers and acquisitions will continue to be a strategy for many companies to create value, increase production and reserves, and achieve cost savings. But the dollars spent on proved property acquisitions will decline relative to the 'mega deals' of 1999-2000."

The biggest increase in US upstream capital spending last year was for proved property acquisitions, which jumped 256% to $27.8 billion -- "almost matching exploration and development spending for the first time," Burk reported. Large transactions by BP PLC, Phillips Petroleum Co., Occidental Petroleum Corp., and Anadarko Petroleum Corp. accounted for three-quarters of that acquisition activity, he said.

Acquisitions of proved properties in Canada also increased by 58% to $6 billion last year, while in the rest of the world proved property acquisitions declined by 51%.

The 155 surveyed companies posted a combined record after-tax profit of $89 billion from their total exploration and production activities last year. That represents a 125% increase in earnings on a 63% rise in revenue to a total $271 billion, Burk said.

Their total capital spending for exploration, development, and acquisitions of proved properties worldwide increased 30% to $124 billion last year. "But that overall number conceals some interesting regional trends," said Burk.

Upstream capital spending increased most in the US, up 132% to $55.8 billion last year, he said. Canadian capital expenditures also were up 69%, "presumably driven by natural gas drilling," Burk said.

Total North American upstream capital spending by the surveyed companies jumped 116%, compared to a 14% decline in their upstream capital spending outside North America, he reported.

Total exploration and development spending by the surveyed companies increased 24% around the globe last year. But the biggest jump again was in North America, where high commodity prices boosted exploration and development spending by 72% in the US and 77% in Canada. Such spending in the rest of the world was essentially flat, up only 1%, Burk said.

Nevertheless, he said, "Last year was the first in the past 5 in which US exploration and development spending fell below 50% of the companies' pretax operating cash flow (revenue less production costs)." US exploration and development spending amounted to 44% of total pretax operating cash flow among the surveyed companies last year, down from more than 100% in 1998. Exploration and development spending in the other international markets averaged 52% of the companies' 2000 pretax operating cash flow.

The increase in exploration and development activity since the last half of 1999 has produced the highest reserve levels both in the US and worldwide since 1996, said Burk.

Oil reserves last year increased 7% worldwide and 19% in the US. Natural gas reserves were up 9% worldwide and 18% in the US.

"For only the second time in 5 years, survey companies replaced more than 100% of their US production through the drill bit -- 130% of oil production and 128% of gas production," said Burk. In 1997, the survey companies replaced 121% of their US oil production and 109% of their US gas production.

Last year, the surveyed companies replaced through the drillbit 96% of their oil production and 133% of their gas production around the globe. From all sources, that replacement rate was 186% for oil and 223% for gas.

"Upstream investment performance measures improved in every measure in the US, but deteriorated on all but one measure worldwide. Nevertheless, the cost to find and develop reserves outside the US remained lower than in the US," Burk said.

Despite increased activity, Burk said he sees none of the "excessive and speculative spending" that normally marks a boom-bust cycle within the industry. Instead, he sees the industry "reacting vigorously and efficiently" to changes and opportunities within the oil and natural gas markets.

"Although we can be virtually certain these trends do not signal the beginning of a period of predictability in energy markets," Burk said, "we can see signs that companies are positioning themselves better to manage successfully and sustainably through the cycles."

The companies surveyed for the Andersen report have proved oil and gas reserves in excess of 5 million boe. Those companies account for an estimated 87% of total US reserves of oil and natural gas liquids, as well as 68% of total US natural gas reserves.

The group includes 34 companies headquartered outside the US. And for the first time it also includes three publicly traded Chinese oil companies that only a few years ago were state-owned, Burk said.

Contact Sam Fletcher at samf@ogjonline.com

Related Articles

Anadarko reports 2014 loss, remains upbeat about Wattenberg

02/09/2015 Anadarko Petroleum Corp. announced a 2014 net loss of $1.75 billion, or $3.47/share diluted, including a net loss of $4.05 billion associated with ...

Anadarko reports 2014 loss, remains upbeat about Wattenberg

02/03/2015 Anadarko Petroleum Corp. announced a 2014 net loss of $1.75 billion, or $3.47/share diluted, including a net loss of $4.05 billion associated with ...

Study finds small subset of wells accounts for most methane emissions

12/15/2014 A small subset of natural gas wells are responsible for most methane emissions from US natural gas production, said a study from the University of ...

Anadarko boosts Wattenberg production

10/16/2014 Anadarko Petroleum Corp. stepped up production in Wattenberg field in Colorado during the second quarter. The rise was attributed to the success of...

SM raises initial production rates in the Eagle Ford shale

10/16/2014 An improved completion design that utilizes longer laterals and increased sand loadings is raising initial production (IP) rates for SM Energy Corp...

Oil and gas midstream ripe for investment, Deloitte specialists say

05/14/2014 Surging US production has made oil and gas midstream operations attractive investment prospects, three Deloitte specialists said during the final d...

OTC: Shale, deepwater development present different challenges

05/06/2014 The oil and gas industry continues to unlock greater resources both onshore and offshore—in shale formations and in deepwater. Growing production f...

Anadarko settles legacy claims against Kerr-McGee for $5.15 billion

04/07/2014 Anadarko Petroleum Corp. and subsidiaries it acquired when it bought Kerr-McGee Corp. in 2006 agreed to pay $5.15 billion to settle fraudulent conv...

Brightoil Petroleum to buy Anadarko’s China subsidiary for $1.075 billion

02/18/2014

Brightoil Petroleum Holdings Ltd. of China plans to buy Anadarko Petroleum Corp.'s subsidiary in China for $1.075 billion.

White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected