Total 2012 capex for top 100 US producers was highest on record: GHS study

Houston (Platts)--18Jun2013/227 pm EDT/1827 GMT


Total capital spending in 2012 for the top 100 US producers, including acquisitions, rose 18% year over year to the highest level on record at $316.6 billion, driven by development capital spending of a combined $208 billion, according to a study released Tuesday by a top boutique investment bank.

Development spending alone was up a "strong" 28% year on year, Global Hunter Securities said in its study of finding and development costs and year-end reserve data from the 100 largest domestic public oil and gas companies that existed over the past five years.

"E&Ps [are] moving into manufacturing mode" as they focus on unlocking the geological codes to efficient production of shale and unconventional resources, GHS said.

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"Also catching our attention was the downtick in acquisition spending on unproven properties, which was off 40% versus the average spend the prior two years," the bank said.

That, coupled with the unprecedented total spending levels, "help confirm our thoughts that E&P companies largely have their plates full when it comes to assembling acreage positions," GHS said. "The focus going forward will be on turning undeveloped land into cash-generating assets."

F&D costs from all sources, including reserve revisions, averaged $37.30/barrel of oil equivalent in 2012, up 94% year over year and more than the five-year average F&D cost of $20.82/boe, GHS said. The bank attributed the bulk of the increase to what it called a "record amount" of negative reserve revisions on natural gas assets (33 Tcf); more than 10% of total gas reserves were impacted by downward revisions from "much lower" (37% lower) gas prices used to calculate reserves in 2012 than the year before, GHS said.

Drillbit F&D costs also jumped 28% in 2012 to $22.70/boe, prompted mainly by oil-weighted reserve extensions of a record 5.9 billion barrels of proved oil reserves last year, up from 4.6 billion added in 2011, GHS said. In contrast, fewer gas reserves were added last year: 33 Tcf compared with 40 Tcf in 2011.

"The unit cost to ... book a barrel of oil reserves is almost always more expensive than drilling for an Mcf of gas," the bank said.

--Starr Spencer, starr.spencer@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com