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

Delaware City refinery, Praxair ink deal for carbon dioxide recovery plant

07/17/2015 Delaware City Refining Co. LLC (DCR), a subsidiary of PBF Energy Inc., Parsippany, NJ, has entered a long-term agreement with Praxair Inc. to suppl...

BHI: US rig count falls 6 units to 857

07/17/2015 The US drilling rig count fell 6 units to reach 857 during the week ended July 17, essentially cancelling out the last 3 weeks’ worth of gains, acc...

Aussie, Timor-Leste regulators terminate Timor Gap permit

07/17/2015 Regulators in Australia and Timor-Leste have now formally terminated Timor Gap production-sharing contract JPDA 06-103, which leaves Australian com...

Husky begins production at Rush Lake heavy oil project

07/17/2015 Husky Energy Inc., Calgary, reported startup of production from its Rush Lake heavy oil thermal project in Saskatchewan, some 8 weeks after startup...

MARKET WATCH: NYMEX crude oil prices drops below $51/bbl

07/17/2015 Light, sweet crude oil prices for August delivery dropped modestly to settle at just under $51/bbl on the New York July 16, but Brent crude oil Aug...

API: US petroleum demand rose in June, second quarter

07/16/2015 Total US petroleum deliveries, a measure of demand, increased 4.2% from June 2014 to average 19.6 million b/d last month. In the second quarter, de...

ConocoPhillips plans further capex reduction for deepwater exploration

07/16/2015 ConocoPhillips reported plans to further reduce its capital expenditures for deepwater exploration, with the “most significant reductions” coming f...

Fitch notes increase in energy-default rate

07/16/2015 Recent actions of two exploration and production companies have pushed the trailing 12-month energy default rate among issuers of high-yield bonds ...

ENOC trims Turkmen plan in Dragon takeover

07/16/2015 Emirates National Oil Co. Ltd. (ENOC), Dubai, will lower target oil production from the Cheleken area offshore Turkmenistan after acquiring full co...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

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
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

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