HOUSTON, June 19, 2012 /PRNewswire/ -- As a result of strong oil prices and technology advances making domestic shale resources accessible, the US oil and gas industry had a banner year for growth across several categories. Combined exploration and development spending increased 38% in 2011, according to Ernst & Young's annual US E&P benchmark study. Oil reserves grew by 9%, or 1.7 billion barrels, in 2011, while oil production increased 3%. Gas reserves and production rose 4% and 9%, respectively in 2011. Oil and gas revenues experienced 23% growth in 2011.
"Long thought of as an oil region in decline, the combination of strong prices for oil and ever-improving technology has turned the US into a growth market," said Marcela Donadio Americas Oil & Gas Sector Leader for Ernst & Young. "The tremendous success of oil production in the Bakken formation, for example, is a true testament to the domestic opportunity and the industry's ability to act on that opportunity."
Total capital expenditures for the companies reviewed were down 16% as a result of lower property acquisition activity. But significant capital went into identifying new resources and developing existing reserves with an investment of $106.1 billion for exploration and development spending in 2011. The smaller independent producers led the growth in exploration and development spending with a 51% increase over 2010; while the large independents increased spending by 39% and the integrated oil companies increased their investments by 25%. Three companies increased exploration and development spending by more than $2 billion in 2011: large independents Occidental Petroleum and Chesapeake Energy along with Hess (an integrated). Ninety-six percent of the companies surveyed increased their capital budgets for exploration and development spending in 2011.
The cost to find and develop new reserves rose from $17.78 per BOE in 2010 to $19.38 per BOE in 2011, reflecting the higher cost of activity in the current economic environment.
Oil and gas reserves
End-of-year oil reserves increased 9% from 18.6 billion barrels in 2010 to 20.3 billion barrels in 2011. This growth was primarily driven by extensions and discoveries of 2.4 billion barrels, the highest level in five years. Oil production rose 3% to 1,403.5 million barrels in 2011.
The growth in oil reserves over the five-year period studied was driven by the independents and large independents with increases of 92% and 37%, respectively.
Led by development in unconventional shale gas or tight gas formations, natural gas reserves experienced a 4% increase to 178.2 Tcf in 2011, while gas production increased 9% to 12.9 Tcf.
"The year-over-year growth in US reserves is impressive," said Donadio. "Increases in exploration and production budgets in light of new potential resources create a very positive outlook for future production potential."
Revenues and profits
Strong oil prices drove a 23% increase in revenues from $147.8 billion in 2010 to $181.4 billion in 2011. US production costs, however, rose 27% in 2011 as the costs for labor, services and other expenses rose by $5.8 billion and production taxes increased $3.9 billion. After-tax upstream profits were $45.6 billion in 2011, an increase of 21% over 2010.
More about the study
The US E&P benchmark study is a compilation and analysis of certain oil and gas reserve disclosure information reported to the Securities and Exchange Commission. The study includes the top 50 exploration and production companies based on 2011 end-of-year oil and gas reserves estimates. It examines the companies' US operations for a five-year period from 2007 through 2011. These companies account for approximately 98% of total US oil reserves and approximately 65% of total US gas reserves, based on January 1, 2012, reserve estimates published by the Oil & Gas Journal.
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SOURCE Ernst & Young