LONDON, Dec. 2, 2014 /PRNewswire/ -- Worldwide oil and gas reserves increased by 11% and 3%, respectively, while capital expenditures among the oil and gas study companies increased 25% in 2013, compared to 2012, according to EY's annual Global oil and gas reserves study. The report also found that total upstream spending for the study companies more than doubled over the five-year period from US$315b in 2009 to US$678.9b in 2013. This study analyzes the worldwide and regional exploration and production (E&P) results for 75 companies for a five-year period from 2009 to 2013.
A key component of increased spending, property acquisition costs soared in 2013 with proved property costs reaching US$115.6b, which is the highest level of the five-year study period. Unproved property acquisition costs were US$63.1b in 2013, representing a 24% increase over 2012. The US, Africa and the Middle East were the only regions to see a decline in total property acquisition costs in 2013.
Dale Nijoka, EY's Global Oil & Gas Leader, says:
"Continued strong upstream capital investment demonstrates the industry's confidence in long-term opportunities. However, in light of current price volatility, we expect to see significant pressure to lower rising production costs as well as additional investment in technologies and techniques that increase efficiencies and drive costs down."
Capital expenditures
Total worldwide capital expenditures for the companies in the study were US$678.9b in 2013. Exploration spending rose 5% higher to US$87.9b in 2013, compared to US$83.4b in 2012 with the increased spending in Brazil led by Petrobras contributing significantly to the total. Meanwhile, development expenditures grew 8% in 2013 to reach US$411.2b. On a regional basis, Asia-Pacific saw the largest increase with development spending increasing by 15% (US$15.2b). Combined exploration and development spending by integrated companies increased by 12%, compared to a 5% increase by the large independent companies. Combined spending by independent companies decreased by 14% in 2013 as depressed natural gas prices in the US and Canada have taken a toll on their cash flows and spending ability.
Revenues and profits
Worldwide after-tax profits declined 4% from US$270.3b in 2012 to US$258.7b in 2013. Only the US and Canada saw increases in after-tax profits. Production costs increased 7% to US$389b in 2013 primarily due to increased lease operating expenses (9% increase) and production taxes (4% increase). Depreciation, depletion and amortization charges rose marginally to US$249.8b from US$248.2b in 2012. Depressed natural gas prices in the US did have some impact as several large oil and gas companies recorded impairments greater than US$1b in 2013.
Mr. Nijoka adds:
"Production increases coupled with softening demand put pressure on pricing. As a result, 2013 production growth resulted in only a slight increase in global revenue, which was offset by rising costs, creating a worldwide fall in after-tax profits."
Oil reserves
Strong acquisition activity in 2013 led worldwide end-of-year oil reserves for the study companies to increase by 11% to 168.6b barrels. The largest oil reserves growth was recorded in Asia-Pacific and was attributed to Rosneft's purchases of reserves from companies that are not included in the study. Oil reserves also notably increased in the US and Canada.
Worldwide oil production showed strong growth rising by 6% to 12.3b barrels in 2013 and again, Asia-Pacific led the pack, recording a 17% increase. The US followed with a 12% gain in oil production. The oil production replacement rate dipped to 115%, excluding purchases and sales in 2013, compared to the five-year study period high of 149% seen in 2012.
Gas reserves
Worldwide end-of-year gas reserves increased by 3% to 643.6 trillion cubic feet. Not surprisingly, the US saw the largest increase in gas reserves with its end-of-year reserves growing by 9%. Extensions and discoveries were strong at 59.6 trillion cubic feet in 2013, but did decline by 8% compared to 2012. Worldwide gas production decreased marginally compared to 2012.
Mr. Nijoka concludes:
"As expected, due to the pricing and supply dynamics in the global market, worldwide gas reserves increased slightly while production decreased. Once again, Asia-Pacific led the way in the purchase and sale of gas reserves."
About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
About the study
The Global oil and gas reserves study is a compilation and analysis of certain oil and gas reserve disclosure information reported by companies in their annual reports filed with the U.S. Securities and Exchange Commission (SEC) or in their publicly available annual reports. This report presents the worldwide and regional exploration and production (E&P) results for 75 companies for the five-year period from 2009 through 2013. The results for these companies are generally representative of the E&P industry as a whole, with the exception that many national oil companies do not publicly disclose financial and operational data and their performance trends may vary significantly.
About EY's Global Oil & Gas Center
The oil and gas sector is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY's Global Oil & Gas Center supports a global network of more than 10,000 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oilfield service sub-sectors. The Center works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant key sector issues. With our deep sector focus, we can help your organization drive down costs and compete more effectively. For more information, please visit ey.com/oilandgas.
Bakyt Azimkanov
EY Global Media Relations
+44 20 7980 0869
[email protected]
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/worldwide-oil-and-gas-reserves-rise-while-profits-fall-300002820.html
SOURCE EY
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