Oil and gas reserves more stable in 2013

June 27, 2014 | By Barbara Vergetis Lundin

According to Ernst & Young (EY)'s seventh annual U.S. oil and gas reserves study, the United States oil and gas industry is emerging from years of volatility prompted by the global financial crisis and subsequent recession.

Corsicana oil field discovery well. Credit: Renelibrary/Wikimedia Commons

While there was a slight decrease in capital spending, U.S. oil and gas reserves each increased by 9 percent in 2013; oil prices remained strong and natural gas prices showed improvement.

"The promising oil and natural gas reserves and profit increases are certainly signs that the industry is enjoying more stability than it has in recent years," said Deborah Byers, EY's U.S. oil and gas leader. "While we saw lower capital expenditure numbers in 2013, that is due in part to the advancement in technologies and processes that are making exploration and production less expensive and more efficient."

Total capital expenditures declined 7 percent in 2013 to $173.5 billion, driven by lower unproved property acquisition costs and lower exploration costs. Proved reserve acquisition costs increased to $16.88 per boe in 2013 compared to $10.76 in 2012 -- a 57 percent increase. In 2013, transactions driving these results were primarily focused on oil reserves.

While exploration costs declined approximately 15 percent in 2013, the level of spending represented the second-highest amount of the five-year study period. Development spending increased every year of the study period, reaching $106.7 billion in 2013. All peer groups -- independents, large independents and integrated companies -- saw an increase in development spending in 2013, but spent less on exploration.

An 11 percent increase in revenues and significant decrease in property impairments fueled a 53 percent increase in after-tax profits for the study companies to $33.4 billion in 2013 -- a significant change from the previous year's study, which showed a 58 percent decrease in after-tax profits for 2012. The dip is due, in large part, to low natural gas prices.

In 2013, an increase in oil production helped push revenues to $199.0 billion, also aided by increased prices as revenues per boe of production.

Both oil and gas reserves saw improvement in 2013. End-of-year oil reserves increased in each year of the study and reached 25.4 billion barrels in 2013.

Extensions and discoveries for both oil and gas reserves in 2013 were the highest of the five-year study period. These additions for oil reserves encompassed 4.1 billion barrels in 2013 and contributed to an oil production replacement rate of 222 percent, excluding purchases and sales.

"Large independents accounted for the largest absolute increases in oil and gas reserves in 2013, though the gas reserves still remain below the level we saw in 2011," Byers said.

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http://www.fierceenergy.com/story/oil-and-gas-reserves-more-stable-2013/2014-06-27