US Oil and Gas Companies Rely on Acquisitions to Replace Sold Reserves

Strategic Insights -

US oil and gas companies are heavily reliant on acquisitions to replace sold reserves, with a study by John S. Herold Inc. revealing that 100 oil companies surveyed were able to replace only 76% of their reserves through new drilling in 1993. The low oil prices have significantly impacted the industry's ability to develop new reserves, forcing companies to focus on high-grade investment projects and enhancing existing asset productivity. Despite the challenges, US oil majors have seen a turnaround in upstream spending, with a 6.3% increase in expenditures in the United States and a 4.4% increase worldwide.

Key Takeaways:

  • US oil and gas companies rely on acquisitions to replace sold reserves, with the ability to replace only 76% of their reserves through new drilling in 1993.
  • Low oil prices have significantly impacted the industry's ability to develop new reserves, prompting companies to focus on high-grade investment projects and enhancing existing asset productivity.
  • The reserve-replacement ratio is "disappointing" despite a "creditable performance" considering the challenges faced by the industry.
  • Chevron Corp., Burlington Resources Inc., Maxus Energy Corp., Occidental Petroleum Co., and Phillips Petroleum Co. are among the companies with the best reserve-replacement ratio over the past three years.
  • The finding and development costs dropped in 1993 to $5.29/boe for the industry worldwide, with companies such as Burlington Resources Inc. and Occidental Petroleum Co. having the lowest finding costs over the past three years.
  • Pennzoil Co., Louisiana Land & Exploration Co., and Parker & Parsley Petroleum Co. are among the companies with the highest finding and development costs last year.

Statistics:

  • 100 oil companies surveyed were able to replace only 76% of their reserves through new drilling in 1993.
  • Without acquisitions, companies only replaced 76% of their domestic production with new development and drilling activity.
  • Total worldwide net reserves for the companies in the survey increased a modest 1.4% to 1.3 billion bbls of oil equivalent (boe) in 1993.
  • US oil majors saw a 6.3% increase in upstream expenditures in the United States, with total upstream spending by the 100 companies in the study up 4.4% to $44.2 billion worldwide.
  • Spending in the United States actually jumped 9.3% to $16.5 billion, representing 37% of total worldwide spending.
  • Reserve-replacement costs dropped significantly worldwide to $4.35/boe in 1993 from $5.41/boe in 1992.
  • Finding and development costs dropped in 1993 to $5.29/boe for the industry worldwide from $5.95/boe a year earlier.

Sources:

  • A John S. Herold Inc study.
  • "Washingtong Post", Date not specified.
  • "Washington Post", Date not specified.
  • "John S. Herold Inc" (consulting firm).
  • "Herold analysis" (specific report not specified).