FOCUS: PRODUCTION Major oil, gas reserve additions reported

March 10, 1997
Several large, internationally active, U.S.-based companies have recently reported sizable gains in oil and gas reserves in 1996. The biggest reserves addition in absolute terms reported to date belongs to Exxon Corp. However, Amoco Corp. scored the largest percentage gain. Exxon Corp. says that its worldwide additions to proved oil and gas reserves totaled more than 1.1 billion BOE 1996, replacing 108% of its 1996 production.

Several large, internationally active, U.S.-based companies have recently reported sizable gains in oil and gas reserves in 1996.

The biggest reserves addition in absolute terms reported to date belongs to Exxon Corp. However, Amoco Corp. scored the largest percentage gain.

Exxon

Exxon Corp. says that its worldwide additions to proved oil and gas reserves totaled more than 1.1 billion BOE 1996, replacing 108% of its 1996 production.

Exxon chairman Lee Raymond said, "This year's strong performance is the third year in a row that we've exceeded 100% replacement. Over the last 10 years, we've added 10.6 billion BOE to proved reserves, more than replacing reserves produced."

All figures exclude property sales. With sales included, reserve replacement in 1996 totaled 102%.

Production totaled more than 1 billion BOE in 1996, similar to 1995. Liquids production was 590 million bbl. Gas production of more than 2.6 tcf reached its highest level since 1980 because of sales resulting from colder weather in Europe and the U.S. and increased demand in Malaysia from the power generation and industrial sectors.

With 13.7 billion bbl of proved oil and gas reserves, Exxon's reserve life of more than 13 years is one of the longest in the industry, the corporation says.

In addition to proved reserve additions, Exxon also added new field resources of almost 2.2 billion BOE.

Raymond said, "This is the highest level achieved by Exxon in almost three decades. Importantly, these resources were added at $0.50/BOE, the lowest level in 20 years," Raymond added.

The company's total oil and gas resource base which includes proved reserves and other discovered resources expected to ultimately be commercial, totaled 40 billion BOE at year-end 1996, up from 39 billion BOE in 1995. Total resources have increased 14% over the past 10 years.

Amoco

Amoco Corp. added more reserves than it produced in 1996, primarily due to significant reserves outside the U.S.

Amoco expects final calculations will show it had a 1996 energy equivalent production replacement rate of 179%, excluding the effect of property ownership changes. The rate is estimated at 164%, when the effects of purchases and sales are included. Amoco expects that these increases will bring year end 1996 reserves to approximately 5.8 billion BOE.

Production replacement outside North America is estimated at 435%.

"We continue to reap the benefits of the refocused upstream strategy we implemented in the early 1990s," said L. Richard Flury, Amoco's executive vice-president responsible for exploration and production. "As a result, we have added more than 2.5 billion BOE to proved reserves over the last 4 years, more than replacing the reserves produced."

Amoco projects it will replace 169% of the liquids and 181% of the natural gas produced last year, excluding property ownership changes. The company estimates 1996 production of 483 million BOE, an increase of 1% over the previous year's production.

Amoco made its most significant reserve additions in Trinidad, where the company has discovered more than 8 tcf of natural gas resources since 1994. Amoco will book more than 2.5 tcf, most of which is associated with its long-term supply contract for the Atlantic LNG Co. of Trinidad and Tobago plant. The plant was authorized in 1996 and is scheduled to begin supplying markets in the Northeast U.S. and Spain in mid-1999. Additional reserve bookings are anticipated over the next few years as additional local and export markets are secured.

The company expects to add about 282 million BOE to its North American reserves through discoveries, extensions, and improved recovery techniques. However, these additions are offset by downward reserves revisions in three U.S. natural gas basins-Hugoton, Kansas; Red Oak, Oklahoma; and San Juan, New Mexico. Amoco projects it will replace 35%, 12% when including sales and acquisitions.

ARCO

ARCO announced that it replaced 133% of its consolidated worldwide oil and gas production in 1996 and that its board of directors approved a $3.4 billion capital spending budget for 1997. Some $2 billion of that is for exploration and production. International exploration and production will get $1.2 billion.

In 1996, ARCO added 468 million BOE to proved reserves while producing 353 million BOE.

The company's international oil and gas unit replaced 312% of its 1996 production, with the largest contribution coming from the Rhourde El Baguel field in Algeria where ARCO has a partnership with the national oil company, Sonatrach.

In another targeted growth business for ARCO, Vastar Resources Inc. replaced 144% of its 1996 production with net reserves additions of 104 million BOE. The largest contributor to the increase was property in the Gulf of Mexico. It added 47 million BOE. ARCO holds an 82.3% interest in Vastar.

In total, ARCO's worldwide reserves grew to 3.875 billion BOE at year end, up from 3.760 billion BOE at the beginning of 1996.

Phillips

Phillips Petroleum Co. replaced 71% of its 1996 worldwide hydrocarbon production at an average finding-and-development cost of $7.52/BOE.

From 1992 through 1996, Phillips' 5-year average production replacement equaled 118%, while finding and development costs average $3.79/BOE-expected to be among the lowest average costs in the petroleum industry.

Finding and development costs are the costs of acquiring, exploring for, and developing oil and gas reserves, divided by the company's reserve additions.

The company's worldwide hydrocarbon production in 1996 was up 1% to 189.3 million BOE. This consisted of a 2.2% decrease in oil production and a 3.5% increase in natural gas production.

On a BOE basis, Phillips' worldwide proved reserves in 1996 decreased by 2% to 2.15 billion BOE. Worldwide proved reserves of crude oil and condensate remained unchanged, while worldwide proved reserves of natural gas decreased 5%.

Phillips replaced 41% of its reserves produced in the United States at an average cost of $6.20/BOE, while replacing 106% of the non-U.S. reserves it produced at an average cost of $8.31/BOE.

Natural gas comprises 49% of its proved hydrocarbon reserves worldwide, and 63% of U.S. reserves.

Oryx

Oryx Energy Co. reported replacing 153% of its 1996 production at a cost of $4.50/BOE. Year-end reserves amounted to 595 million BOE, up 5% from 1995. Approximately 30% of the replaced reserves were from acquisitions, virtually all in the U.K. Some 40% of reserve additions in the U.S. came from drilling; 60% overseas.

In 1996, Oryx invested $310 million to develop oil and gas assets, $90 million to explore worldwide, and $100 million to acquire producing properties, practically all in the U.K.

The 1997 budget at $520 million will be the largest amount Oryx has invested in 5 years. The exploration drilling component has increased from $31 million in 1996 to $75 million this year. Geographically, about 67% of the 1997 budget will be invested in the U.S., primarily the Gulf of Mexico, with the balance going overseas. Functionally, about 28% is allocated to exploration and the remainder is dedicated to development.

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