US oil and gas investment ramps up to decade-high

usA new report from global advisory firm Ernst & Young (EY) has shown that investment in oil and gas in the US has hit its highest level in at least a decade.
Released in early June, the US oil and gas reserves study 2013 also found that, although US oil and gas producers significantly increased their exploration, development and acquisition spending, there was a 58 per cent decrease in after-tax profits largely driven by low natural gas prices.
“The increased exploration and development spend we’re seeing in this year’s study speaks to the incredible opportunity unfolding in tight oil from shale formations and the high cost of developing these unconventional resources,” EY Americas oil and gas sector leader Marcela Donadio said in a statement.
“Everyone wants in and they are paying a premium to play.” Total capital expenditure for the top 50 US exploration and production companies included in the study amounted to $185.6 billion – a rise of 20 per cent on the previous year, and the highest level recorded in the study’s 10-year history.
Mainly driven by increased tight oil and liquids activity, exploration spending rose 20 per cent from 2011 to $26.3 billion; development investment peaked at $103.4 billion, 21 per cent more than in 2011.
The largest increases in combined exploration and development spending last year were reported by BHP Billiton ($4.5 billion), Royal Dutch Shell ($2.7 billion), Apache ($2.6 billion) and Marathon Oil ($2.4 billion).
EY found that tight oil developments and an increased focus on natural gas liquids contributed to a 45 per cent surge in US oil and liquids reserves from 2008 to 2012. Last year, total oil reserves for the 50 companies in the study rose to 23.3 billion barrels, while production increased by 13 per cent to 1.6Bbbls.
“Extensions of existing reserves and discoveries of new reserves – which have increased every year of the five-year study time period – reached 3.8 billion barrels in 2012. These strong additions helped fuel an
oil production replacement rate of 258 per cent in 2012,” the study stated.
Ms Donadio said that for years, people believed the industry would struggle to replace US oil reserves.
“The steady rise in extensions and discoveries, as well as oil production replacement rates, changes that story,” she said.