E&Y: US E&P spending reaches new heights

US oil and gas producers boosted exploration, development, and acquisition spending in 2012 despite a steep decline in aftertax profits driven largely by low natural gas prices, Ernst & Young reported June 4 in the latest issue of its US oil and gas reserves study.

The study analyzes US upstream spending and performance data for the largest 50 companies based on yearend 2012 oil and gas reserves estimates.

Total capital expenditures for the 50 companies reached $185.6 billion—up 20% from 2011—and marking the highest in the study’s history.

Total 2012 exploration spending climbed 20% from the previous year to a total of $26.3 billion, which E&Y attributed to increased tight oil and liquids activity. Development spending last year soared to $103.4 billion, up 21% compared with 2011.

“The increased exploration and development spend we’re seeing in this year’s study speaks to the incredible opportunity unfolding in tight oil from shale formations and the high cost of developing these unconventional resources,” said Marcela Donadio, E&Y Americas oil and gas leader. “Everyone wants in, and they are paying a premium to play.”

Capital expenditures

Study results showed companies spent 17% more to acquire properties compared with 2011. Spending for proved properties rose to $21.6 billion in 2012 from nearly $14 billion in 2011, while spending for unproved properties reached $33.8 billion in 2012.

The cost to find and develop new reserves surged to $45.03/boe in 2012, reflecting not only increased spending, but also downward revisions of gas reserves. Total gas reserves reported by the companies were down 10% by yearend 2012 compared with yearend 2011. Despite production curtailments throughout much of 2012, gas production increased 4%.

The study also examines the companies’ US operations during 2008-12 (OGJ Online, June 25, 2008).

Tight oil developments and an increased focus on natural gas liquids contributed to a 45% surge in US liquids reserves over a 5-year study period. In 2012, oil reserves for the 50 companies rose to 23.3 billion bbl while production increased by 13% to 1.6 billion bbl.

Extensions of existing reserves and discoveries of new reserves reached 3.8 billion bbl in 2012. These strong additions helped fuel an oil production replacement rate of 258% in 2012.

“For years, people said the industry would struggle to replace US oil reserves,” Donadio said. “The steady rise in extensions and discoveries as well as oil production replacement rates changes that story.”

Although total oil and gas production increased 7% in 2012, it could not compensate for the $26.4 billion in property impairments recorded due to low gas prices. These impairments, paired with a price-driven 3% decrease in revenues and increases in other costs, contributed to a 58% fall in after-tax profits for study companies.

The reserves study is a compilation and analysis of certain oil and gas reserve disclosure information reported to the US Securities and Exchange Commission.

Contact Paula Dittrick @paulad@ogjonline.com.

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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