According to annual reports from 42 international oil and natural gas companies that have reported data on upstream expenditures since 2000, total upstream spending by these companies increased 0.4% in 2013, relatively flat compared with an average increase of 11%/year during 2000-12. Global spending on exploration and development for 2013 increased by $18 billion, a 5% increase from the previous year, while spending on property acquisition fell by $17 billion.
This analysis, conducted by the US Energy Information Administration, included both large producers such as ExxonMobil Corp. and Brazil’s Petroleo Brasileiro SA (Petrobras), and smaller ones such as Encana Corp. and Talisman Energy Inc. The companies accounted for 39% of non-Organization of Petroleum Exporting Counties’ production in 2013, with a combined market capitalization of more than $2.4 trillion.
The reports, which are filed with the US Securities and Exchange Commission, show that unfolding exploration and development activities on fields acquired in earlier years have contributed to the slight increase in spending in 2013.
According to EIA, for this group of companies, declining cash flow in the past 2 years due to flat oil prices and rising costs could challenge future exploration and development, particularly in the face of rising debt levels. However, rising drilling and production efficiency could offset reduced spending levels.
Upstream expenditures for oil and natural gas production activities include three categories: property acquisition, exploration and development, and production. Exploration and development includes expenditures related to searching for and developing the facilities and infrastructure to produce reserves. Production includes costs associated with extracting oil and natural gas from the ground once the field has been developed. Property acquisition includes costs incurred to purchase proved and unproved oil and gas reserves. After a large increase in 2010, driven by ExxonMobil’s acquisition of XTO, an independent oil and gas producer, acquisition expenditures have declined steadily and in 2013 were the lowest since 2009.