During a year in which producers shifted their spending away from natural gas and toward oil and away from amassing acreage to developing what was previously acquired, “everything was up,” Ernst & Young LLP’s Charles Swanson, Houston managing partner, told reporters in Houston Tuesday at a briefing on the company’s latest U.S. exploration and production (E&P) benchmark study.
The drilling and completion technology migration from unconventional gas to unconventional oil, coupled with robust oil prices, gave the industry a banner year in multiple categories during 2011, even if dry gas was upstaged by oil and gas liquids.
“Combined exploration and development spending increased 38% in 2011,” Ernst & Young said. “Oil reserves grew by 9%, or 1.7 billion bbl, in 2011, while oil production increased 3%. Gas reserves and production rose 4% and 9%, respectively in 2011. Oil and gas revenues experienced 23% growth in 2011.”
Marcela Donadio, the firm’s Americas oil and gas leader, said independents continued to lead the charge in the U.S. gas patch. However, there was a shift in companies’ spending.
Total capital expenditures for the 50 companies reviewed were down 16% due to lower property acquisition activity. However, “significant” capital went into identifying new resources and developing existing reserves. The companies invested $106.1 billion in exploration and development in 2011, according to the study.
“The smaller independent producers led the growth in exploration and development spending with a 51% increase over 2010; while the large independents increased spending by 39% and the integrated oil companies increased their investments by 25%,” the firm said.
There were some particularly big spenders in the pack, which increased their exploration and development spending by more than $2 billion last year. They were large independents Occidental Petroleum and Chesapeake Energy Corp., along with integrated company Hess Corp. And 96% of the 50 companies increased capital budgets for exploration and development spending in 2011.
The cost to find and develop new reserves rose, the study found, from $17.78/boe in 2010 to $19.38/boe last year.
The 4% increase in gas reserves last year to 178.2 Tcf was mainly due to shale gas or tight gas formations, the study said. “Extensions and discoveries were strong at 26 Tcf but decreased 4% from 27.2 Tcf in 2010. For the third consecutive year, Chesapeake Energy recorded the largest extensions and discoveries (4.2 Tcf in 2011) as a result of its active drilling program.”
According to Ernst & Young, gas production was 12.9 Tcf last year, up from 11.9 Tcf in 2010, a 9% increase. “ExxonMobil accounted for 47% of the total increase as additional unconventional gas volumes led to a 487 Bcf increase in its production,” the study said. “Several other integrateds saw the largest declines in gas production in 2011: BP, Royal Dutch Shell and ConocoPhillips had production declines of 14%, 16% and 7%, respectively.”
Overall, independents, large independents and integrated companies have grown gas reserves over the period from 2007 through 2011, Ernst & Young said. “The integrateds’ gas reserves grew 20% while the large independents’ increased 5%; these results were significantly impacted by ExxonMobil’s acquisition of XTO Energy in 2010,” the study said. “The independents have benefited most from the unconventional gas boom as their gas reserves increased 57% over the five-year period.”
Oil reserves of the surveyed companies stood at 20.3 billion bbl at the end of last year, a 9% increase from the year before. The growth mainly came from extension and discoveries of 2.4 billion bbl, Ernst & Young found.
“The year-over-year growth in U.S. reserves is impressive,” Donadio said. “Increases in exploration and production budgets in light of new potential resources create a very positive outlook for future production potential.”
In the near term, though, John Russell, Ernst & Young oil and gas assurance partner, said the companies would be “really hard pressed” to generate another year of growth in gas reserves after a full year of low gas prices.
Â©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |