Finding and acquisition costs continued to soar in 2005, to no one's surprise, according to Howard Weil's annual study of finding costs and reserve additions. The New Orleans-based investment banker's study is based on five-year data ending year-end 2005 from 51 E&P companies the firm covers. All-sources finding and development costs (land, drilling, acquisitions and reserve revisions) ranged from $2.90 per barrel of oil equivalent (BOE) for Equitable Resources, which is active in the Appalachian Basin, to $34.56 for Energy Partners Ltd., which operates in the Gulf of Mexico. The 2005 mean was $13.88 per BOE, up from $7.10 in 2002. The 51 companies range in size from a total net enterprise value (equity value, long-term debt and working capital) of $43 billion for Dominion Resources Inc., to $454 million for Gasco Energy Inc. That range encompasses widely divergent business models as well. Dominion conducts E&P activity in the Lower 48, Gulf of Mexico and Canada, and it has utility assets in Virginia. Last year, it spent $1.7 billion on oil and gas activities. Denver-based Gasco, meanwhile, is relatively new and is focused on drilling for tight-gas plays in the U.S. Rockies only. Last year it incurred $50 million in total expense for oil and gas drilling activities. Reserve-replacement rates in 2005 ranged from 2,163% for Gasco to 10% for Stone Energy Corp., which has since agreed to be acquired by Plains Exploration & Production Co. The median reserve-replacement rate from drilling alone, without reserve revisions or acquisitions, was 160% in 2005, versus 134% in 2004, and looking further back, 168% in 2001. The median for replacement from all sources, including drilling and acquisitions, was 225% last year, versus 205% in 2004, and 250% in 2001. The data reveal a number of ways to look at a company's potential. Reflecting its newness and lack of development, therefore, higher reserve potential, Gasco topped the list with the longest reserve-life index-some 44.7 years. The E&P company with the highest percentage of proved undeveloped (PUD) reserves at year-end 2005 was ATP Oil & Gas Corp. at 76%. Companies with offshore assets or with large positions in Rockies gas-resource plays tend to report the highest percentage of PUD reserves. The highest percentage of PUDs held at year-end 2005 among the 51 companies reviewed was ATP, whose assets are solely in the Gulf of Mexico and North Sea. But right behind was tiny Gasco, with 74% of its reserves in the PUD column. Ultra Petroleum Corp, Western Gas Resources Inc., Swift Energy Co., Callon Petroleum Co. and The Williams Cos. also reported more than 50% PUD reserves. If raw acreage is the measure of choice, then the company having the most land under its belt is Occidental Petroleum, with 50.7 million acres at year-end 2005. Kerr-McGee Corp. ranked second with 33 million acres and Devon Energy Corp. had 26.6 million (prior to its recently announced acquisition of Chief Oil & Gas, which brings Devon more acreage in the Barnett Shale).
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