An analysis of the top 50 U.S. companies found that reserve replacement costs were the second highest in five years, escalating 73% last year, reaching $8.20/boe, according to a new report by John S. Herold. Meanwhile, reserve replacement rates declined sharply, with the top producers replacing 162% of natural gas production, down 34% from a year earlier, and 141% of oil production, 40% lower than 2000.

“Capital spending dropped 13.4% to $43.5 billion, as a 35% surge in exploration and development costs was more than offset by a dramatic 58% plunge in proved acquisition spending,” the study said. BP was the biggest U.S. spender at $4 billion, down 70% from the $12.7 billion the major spent in 2000.

“Reserve replacement costs were the second highest in the last five years, falling below only the dreadful figures recorded in 1998,” said Nicholas D. Cacchione, Herold’s director of research. “Finding and development costs jumped 73% to $8.99/boe, while proved acquisition costs rose 49% to $6.53/boe.”

While gas reserves increased 6.3% to 104.8 Tcf, natural gas replacement rates through the drill bit dropped below 100% for the fourth time in the last five years. Oil reserves for the top 50 U.S. producers increased only 400 million barrels in 2001, mainly on the strength of 1.7 billion barrels added through extensions and discoveries. Reserve purchases plunged to 400 million barrels from the 3.6 billion barrels acquired in 2000.

The upstream financial results of the 50 companies fell slightly from 2000, as net income in 2001 dipped 12% to $22.4 billion. Revenues increased 6% to $75.5 billion on production gains, with average realizations gaining only 1.2% to $23.02/boe. However, revenue gains were wiped out by a 9.7% increase in per unit production costs and a 37% jump in depreciation, depletion, and amortization expenses.

For a copy of the “Herold 35th Annual Reserve Replacement Cost Analysis”, call (203) 847-3344 or e-mail accounts@herold.com.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.