EY analysis: US oil and gas sector defies price plunge; production and profits soar in 2023

• Despite lower commodity prices, US oil and gas production soared to a record high in 2023, while costs fell 6%.
• Producers recorded revenues of $244.4 billion, the second-highest level in the last five years and shifted more capital toward exploration and development and merger and acquisition activity in 2023.
• Eighty percent of the studied companies reported Scope 1 and 2 emissions, up from 72% in 2022 and 64% in 2021.

NEW YORK, Aug. 20, 2024 /PRNewswire/ -- The EY US oil and gas reserves, production, and ESG benchmarking study reveals an industry demonstrating remarkable resilience and financial performance, despite facing a challenging economic landscape in 2023. The study, which examines the 50 largest publicly traded exploration and production (E&P) companies, highlights the industry's ability to navigate price fluctuations and maintain a trajectory of growth and profitability.

"The health of the US oil and gas sector is not solely dependent on high commodity prices, as our study indicates," said Herb Listen, lead author of the study and Oil & Gas Assurance Partner at Ernst & Young LLP. "The studied companies not only boosted production to an all-time high but also effectively managed costs, rewarded shareholders and invested toward growth."

The combined revenue of the studied companies remained the second highest in the five-year study period, falling 26% from a 2022 high to $244.4 billion, while recording a 6% decrease in production costs on a per-barrel-of-oil equivalent (BOE) basis. The industry also reported pretax profits of $83.9 billion, aligning with the profits observed in 2021 and showcasing the sector's sustained financial health.

Capital expenditures in exploration and development hit a five-year peak at $93.1 billion — a 28% increase from the previous year. This rise in spending reflects the industry's robust financial position following record profits in 2022 and a strategic deployment of capital into core operations. Notably, acquisitions climbed by 57% year over year, indicating a strong appetite for strategic dealmaking. Furthermore, independent producers refocused capital on growing production while also delivering higher returns to investors.

"The commercial fundamentals of the US oil and gas sector remains strong," said Bruce On, Partner, Strategy and Transactions, Ernst & Young LLP. "Major deals are redefining the playing field, as top companies streamline operations and bring cutting-edge technology to the forefront. They're strategically positioning their assets, anticipating an enduring need for oil and gas even amid energy transition."

Despite a marginal decline in total US oil and gas reserves, the industry sustained a production replacement ratio above 100% through extensions and discoveries. Oil reserves dropped to 33.3 billion barrels and combined gas reserves to 186.1 trillion cubic feet, a 1% and 4% decrease, respectively, compared with 2022.

As the sector progresses, the emphasis on sustainability and carbon emission reductions is intensifying. Eighty percent of the studied companies voluntarily reported Scope 1 and Scope 2 greenhouse gas emissions, with 42% of the companies obtaining external assurance over this reporting. More than half of the companies (64%) reported a climate-related target or goal as part of their voluntary disclosures.

"The oil and gas sector remains a cornerstone of the US economy and global energy security," said Pat Jelinek, EY Americas Oil & Gas and Chemicals Leader. "As the sector and energy systems decarbonize, leading companies are transforming their businesses through strategic investments and innovation to drive both profits and sustainability, simultaneously, while also providing the world scaled alternatives for affordable energy."

About the study
The EY US oil and gas reserves, production, and ESG benchmarking study is a compilation and analysis of US oil and gas reserve and production information reported by publicly traded companies to the SEC and an analysis of certain publicly reported ESG disclosures, as applicable. It presents results for the five-year period from 2019 to 2023 for the 50 largest companies based on 2023 end-of-year US oil and gas reserve estimates. These companies represent approximately 42% of the US combined oil and gas production for 2023 and serve as a bellwether of industry trends.

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