Despite skyrocketing commodity prices, in 2008 oil and gas companies marked increased E&P costs, decreased profits and a decline in ending oil reserves, according to Ernst & Young’s recently released U.S. E&P Benchmark Study. The survey included 40 integrated and independent oil and gas companies representing about 70% of total domestic oil reserves and 61% of gas reserves.
Proved-property acquisition costs decreased in 2008, but overall capital spending increased by some 35% over 2007 spending to $132.1 billion, says Marcela Donadio, Americas oil and gas sector leader for Ernst & Young.
“The data tells us the companies in this group are clearly maintaining a strategic, long-term vision in their capital expenditures. We expect to see some tempering of the capital expenditures in 2009, but we believe the industry continues to focus on long-term strategies despite relatively low commodity prices.”
Although the surveyed companies’ 2008 revenue grew 35%, to $183.3 billion, increases in production costs and depreciation, depletion and amortization (DD&A) led to an 8% decline in after-tax profits, from $42.8 billion in 2007 to $39.3 billion in 2008.
“Production costs have doubled since 2004, and have remained at an all-time high throughout 2008,” Donadio says. DD&A costs increased from $30.2 billion in 2007 to about $67.8 billion in 2008.
Meanwhile, negative oil-reserves revisions, mostly due to write-downs in reserves valuations driven by lower commodity prices, led to a 7% decline in 2008 ending reserves to 15 billion barrels of oil from 16.1 billion in 2007. However, oil production showed a 1% increase in 2008.
Negative revisions of 6.7 trillion cubic feet (Tcf) were recorded for gas reserves in 2008, but ending reserves still grew 4%, from 139.9 trillion in 2007 to 145.2 trillion in 2008. Gas production increased in each of the past five years, and grew 8% in 2008. The gas all-sources production-replacement rate was 149% in 2008.
Finally, with low year-end prices forcing many companies to reduce or revise reported reserves, finding and development costs per barrel of oil equivalent “increased dramatically in 2008,” from $14.51 per barrel equivalent in 2007 to $39.58 in 2008. Also, production costs grew 25%, from $11.81 per barrel equivalent in 2007 to $14.72 in 2008.
Recommended Reading
Google Exec: More Collaboration Needed for Clean Power
2024-04-17 - Tech giant Google has partnered with its peers and several renewable energy companies, including startups, to ramp up the presence of renewables on the grid.
Government, Private Sector Learning to ‘Dance’ Towards Transition
2024-03-18 - Panel: Federal loans will continue to play a major role in advancing newer energy technologies.
Baker Hughes Makes Flare Emissions Breakthrough
2024-03-14 - Baker Hughes has developed a new application for flare.IQ, its emissions abatement technology.
Stonepeak Joins Shizen to Form Asian Onshore Wind Platform
2024-03-26 - Stonepeak will have an 80% interest in the onshore wind energy platform, with Japan-based Shizen retaining the remaining 20% interest.
EE North America, Montauk Sign Biogenic CO2 Delivery Deal
2024-02-14 - EE North America and Montauk Renewables signed a contract for the delivery of 140,000 tons per year of biogenic CO2, which will be turned into e-methanol.