Producers continue to reach deep into coffers to pay finding and development (F&D) costs this year, establishing a yet-higher new U.S. gas-price floor. All-in F&D soared 75% in 2006 to a record $3.29 per thousand cubic feet equivalent (Mcfe), up from $1.89 in 2005, for a 32-company study group. Yet, the trend may soften slightly this year to average $3.13 per Mcfe. So says Calyon Securities (USA) Inc. E&P analyst Carin Dehne Kiley. She and her colleagues studied 32 U.S. companies' 2006 operational statistics, including revenues, production, margins, profit, cash flow and reserves. The $3.29 average F&D cost for the 32 companies in 2006 was largely due to increased spending on unproved leasehold (land grabs), a 35% increase in drillbit costs, a 25% increase in acquisition costs and negative net reserve revisions that were largely due to a lower year-end 2006 natural gas price versus that of year-end 2005. Last year, the study group's total acquisition costs averaged $3.94 per proved Mcfe, up from $2.33 the previous year-a full 70% increase-and a major step change in an upward trend. For more on this, see the June issue of Oil and Gas Investor. For a subscription, call 713-260-6441.
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