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.
"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.
