NrgEdge Staff

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Last Updated: May 26, 2016
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For the second consecutive year,oil companies worldwide produced more oil and natural gas than they added to their proved reserves, excluding revisions to existing proved reserves and purchases of reserves in place. This is not necessarily an indication of fewer available resources, but rather that at current prices, there are fewer resources that can be turned into proved reserves, which are underground oil and gas that can be commercially produced at current prices using currently available technology.

Based on analysis of recently released annual reports, 85 publicly traded companies added a total of 13.7 billion barrels of oil equivalent (BOE) to their reserves base,three-quarters of the amount the same group of companies produced in 2015. A combination of reductions in exploration and development (E&D) investment and fewer extensions and discoveries contributed to the decline. Of the companies that submitted first-quarter 2016 financial results, capital expenditures declined 35% from first-quarter 2015, suggesting continued reductions in E&D investment, which could reduce reserves additions in 2016.

The reserves replacement ratio—the ratio of proved reserves added during a given year to production for that year—indicates the extent to which a company is replacing its produced reserves (Figure 1). The group of 85 companies as a whole had a reserves replacement ratio of approximately 100% in 2012 and 2013, and around 75% for 2014 and 2015. However, the ratios vary significantly by company type. Only the U.S. onshore companies added more reserves to their collective portfolio than they produced in 2015, but the effect on the global reserves base is modest because these companies hold a relatively small share of proved reserves and production.


Each company grouping differs by its area of operations and the types of assets in its portfolio. State-owned companies are mostly national oil companies outside of the Organization of the Petroleum Exporting Countries (OPEC). The international/integrated oil companies are large producers that have refining and midstream assets, with global portfolios of onshore and offshore oil production. The North American mixed companies are U.S. and Canadian exploration and production (E&P) companies that are smaller producers but with fairly broad portfolios geographically and by production type, including shale, oil sands, and offshore. The U.S. onshore producers are smaller E&P companies that focus mainly on onshore production in the United States. Collectively, the 85 companies produced 50 million BOE per day in 2015, two-thirds of which was crude oil and the remainder being natural gas and hydrocarbon gas liquids.

Analysis by major area of operations and production portfolio also reveals volumetric differences in reserves additions (Figure 2). State-owned companies and international/integrated oil companies increased reserves additions in 2015,while North American companies with a mixed production portfolio and U.S.onshore companies added less than in 2014. Companies can add proved reserves through new discoveries, enlargement of a reservoir's proved area (extensions),improvements in the recovery of existing reserves, purchases of another company's proved reserves, or revisions of existing reserves for economic or technical reasons. For the purposes of this analysis, purchases of reserves in place and reserves revisions are excluded from the calculation of reserves additions.


Expenditures for E&D constitute most of a company's upstream capital investment. When calculated on a reserve addition per barrel basis, these expenditures represent the cost of finding and developing a barrel of oil. Finding and developing costs declined$10.23/BOE in 2015 (Figure 3). Since there may be a timing mismatch between when an expenditure is made and when a proved reserve addition is formally recognized, standard practice is to average the results over several years.Finding and developing costs for these companies were $25.69/BOE in 2015, the lowest in the 2012-15 period and lower than the four-year average of $29.25/BOE.


Similar to the reserves additions and the reserves replacement ratio, finding and developing costs differed across the company groupings. In recent years, U.S. onshore companies tended to have lower E&D expenditures per reserve addition compared with the other groups, as many reserves additions came from geologically familiar shale basins in the United States. Other producers typically operate in areas where it is more challenging to find reserves, such as deep water offshore or in more mature fields that are the foundation of legacy production (such as in China or Russia). The decline in E&D expenditures for national oil companies and international/integrated companies suggests a reduction in exploration activity in such high-cost areas.

With most companies indicating continued reductions in E&D budgets absent a meaningful increase in crude oil prices, proved reserves additions will likely continue to decline.

U.S. average regular gasoline retail and diesel fuel prices increase

The U.S. average regular gasoline retail price increased six cents from the previous week to $2.30 per gallon on May 23, down 47 cents from the same time last year. The Midwest price increased 10 cents to $2.28 per gallon, followed by the Gulf Coast, up eight cents to$2.06 per gallon. The Rocky Mountain price rose six cents to $2.30 per gallon,the East Coast price increased three cents to $2.25 per gallon, and the West Coast price rose one cent to $2.66 per gallon.

The U.S. average diesel fuel price increased six cents from a week ago to $2.36 per gallon, down 56 cents from the same time last year. The Gulf Coast price rose eight cents to $2.23 per gallon, followed by the West Coast price, which increased seven cents to$2.60 per gallon. The East Coast price increased six cents to $2.38 per gallon,the Midwest price rose five cents to $2.33 per gallon, and the Rocky Mountain price was up three cents to $2.36 per gallon.

Propane inventories fallslightly

U.S. propane stocks decreased by 0.1 million barrels last week to 74.1 million barrels as of May 20, 2016, 0.9 million barrels (1.2%) higher than a year ago. East Coast and Gulf Coast inventories decreased by 0.2 million barrels and 0.1 million barrels,respectively. Midwest inventories increased by 0.2 million barrels, while Rocky Mountain/West Coast inventories remained unchanged. Propylene non-fuel-use inventories represented 5.4% of total propane inventories.

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September, 21 2019
Your Weekly Update: 16 - 20 September 2019

Market Watch  

Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b

  • Global crude oil prices surged at the start of the week as news that a successful drone strike on the Abqaiq processing plant and the Khurais oil field in Saudi Arabia took out over half of the Kingdom’s crude production capacity
  • Brent prices jumped above US$70/b at one point on fears on global supply disruption, but abated as President Donald Trump authorises the release of US strategic petroleum reserves to cover the market
  • Initial fears that the Saudi Arabian crude output would be crippled for months proved to be extreme, with Saudi Aramco announcing that some 70% of capacity at Abqaiq had been restored within days
  • But more worryingly is that this incident escalates the risk of a full-blown military confrontation with Iran; the US was quick to accuse Iran of the attack, citing data on the attack, which was denied by Iran
  • Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack, although initial results of a Saudi investigation pointed to the weapons originating from Iran
  • For now, crude oil prices have retreated as the risk of widespread supply disruption abated, but tensions are still high in the region
  • This comes after President Trump signals that he was considering easing sanctions in an apparent thaw in the US-Iran relationship; this opportunity now appears to have evaporated
  • Saudi Arabia’s new oil energy minister, Prince Abdulaziz bin Salman, made a positive impression at the recent OPEC+ meeting, with errant members of the group signalling that they were now ready to adhere to the supply deal
  • In Venezuela, the oil crisis continues as ongoing US sanctions now mean that the country cannot find enough vessels to transport its crude, as shippers fear losing insurance coverage if they transport Venezuelan oil
  • Iran has released the UK-flagged Stena Impero vessel that it had impounded, a lone bright spot in a region now clouded by geopolitical tensions
  • Against this backdrop, the US active rig count recorded yet another fall, losing five oil and seven gas rigs for a net drop of 12 to a new total of 886 rigs
  • With the shock of the Saudi drone attacks abating, crude oil prices are retreating back to their previous range – US$60-63 for Brent and US$56-59/b for WTI – as the impact of global supply was minimised; another attack, however, might cause a more permanent shift in prices


Headlines of the week

Upstream

  • Equinor has received consent from the Norwegian Petroleum Directorate to continue operations at the Tordis and Vigdis fields through 2036 and 2040, respectively, extending the life of the North Sea fields by 34 years
  • BP has announced that it will deploy continuous measurement of methane emissions for all future oil and gas projects in a bid to reduce emissions
  • CNOPC and Niger have agreed to collaborate on a 1,892km pipeline to carry oil from Niger’s Agadem rift basin to port facilities in Benin
  • The South African government is tabling a new law that will allow the state to take a free stake of up to 10% in all new oil and gas ventures, hoping to capitalise on a surge in upstream interest after Total’s Brulpadda discovery

Midstream/Downstream

  • As the IMO deadline for low-sulfur marine fuels approaches, refiners have begun stockpiling supplies of very low-sulfur fuel oil to ensure adequate supply; this includes Japan’s Cosmo Oil that aims to begin supplying VLSFO to the domestic marine market by October 2019
  • IndianOil’s Gujarat refinery stated it ready to produce 12,900 b/d of VLSFO by October while its Haldia refinery will start producing 5,500 b/d of VLSFO by December; this should be adequate to cover the India’s marine fuel demand
  • India is considering selling a stake in BPCL, the country’s second largest refiner, to an international firm to boost competition in downstream fuel retailing that has historically been dominated by state firms
  • Valero Energy and Darling Ingredients are launching the first renewable gasoil plant in Texas, focusing on producing renewable diesel and naphtha
  • In the UK, Essar Oil’s Stanlow refinery aims to increase its diet of US crude from a current 35% to 40%, leveraging on cheaper American oil
  • The after-effects of Russia’s contaminated crude through the Druzhba pipeline continues as Total issues a tender to sell 1.3 million barrels of tainted Ural crude through Rotterdam after failing to process it

Natural Gas/LNG

  • Poland has won a ruling from the EU courts to reduce Russian control over the key EU Opal pipeline that carries Russian gas from the Nord Stream link to Germany, preventing Gazprom from using most of Opal capacity in a bit to increase energy security for Eastern European countries
  • Vitol and Mozambique’s state player ENH have set up a new joint venture in Singapore to capitalise on trading opportunities for LNG, LPG, and condensate
  • Australia’s Liquefied Natural Gas Ltd and Delta Offshore Energy will supply gas from the Magnolia fields to an LNG-to-power project in Bac Lieu, Vietnam
  • Eni’s Baltim South West gas field offshore Egypt has started up production, only 3 years after discovery, producing an initial 100 mscf/d of gas
  • US gas player Sempra is looking to take FID on its Energia Costa Azul LNG project in Mexico’s Baja California region by the end of 2019
  • Egypt has announced that it expects to receive first natural gas from Israel by end-2019 through the East Mediterranean Gas pipeline, with initial supplies of 200 mscf/d that will rise to 500 mscf/d by 2020
  • The Independence floating LNG terminal in Lithuania – built to reduce the Baltic region’s dependence on Russian gas – is set to receive its first-ever cargo from Siberia, likely from Novatek’s LNG projects in Yamal
September, 20 2019
Financial Review: Second-Quarter 2019
Key findings
  • Brent crude oil daily average prices were 9% lower in second-quarter 2019 than in second-quarter 2018 and averaged $68 per barrel
  • The 117 companies in this study increased their combined liquids production 4.6% in second-quarter 2019 from second-quarter 2018, and their natural gas production increased 5.0% during the same period
  • Nearly half of the companies were free cash flow positive—that is, they generated more cash from operations than their capital expenditures
  • Dividends plus share repurchases were nearly one-third of cash from operations, slightly lower than the six-year high set in first-quarter 2019

Distributions to shareholders via dividends and share repurchases amounted to nearly 33% of cash from operations


See entire second-quarter review

September, 20 2019