Oil reserves for the largest U.S. companies increased by 21% in 2017

Significant extensions and discoveries by the 50 largest U.S. oil and gas companies (see note 1) are responsible for a 21% increase in oil reserves in 2017, according to EY’s latest U.S. oil and gas reserves and production study, which can be downloaded here.

The study was built using raw data extracted from Evaluate Energy. For a demonstration of Evaluate Energy’s financial and operating database, please click here.

Source: Chart created using data published for 50 U.S. oil and gas companies in EY’s U.S. oil and gas reserves and production study for 2018.

“Oil reserves for the study companies increased 21 per cent in 2017 due to significant extensions and discoveries, net upward revisions and purchases partially offset by production and sales. As a result, the study companies reported the highest oil reserves for the five-year study period,” the report said.

Extensions and discoveries increased by 76% in 2017 from 2016 and, at five billion barrels, were the highest of the study period (2013-2017) following the lowest level reported last year.

End-of-year gas reserves for the study companies increased 19% in 2017 to 176 tcf, marking the highest level of gas reserves since 2014.

“The increase is mainly due to extensions and discoveries, upward revisions and purchases, partially offset by sales of proved gas reserves and production,” the report noted.

Study companies recorded net upward revision of 9.9 tcf in 2017— the first net upward revision for the study period. The study companies reported 13.3 tcf upward revisions and 3.4 tcf downward revisions

Notes

1) The 50 companies are the 50 largest in the U.S. based on 2017 end-of-year oil and gas reserve estimates. The study companies cover approximately 44% of the US combined oil and gas production for 2017.

U.S. companies maintain near-record output during downturn

Despite cuts in capital investment during the price downturn, a new EY study based on Evaluate Energy data shows that the 50 largest U.S. oil and gas companies (see note 1) were able to maintain record levels of output.

The new EY U.S. oil and gas reserves and production study is available to download here.

Capital investment fell during the 2015-2016 down cycle, and reserve additions fell almost in lockstep. In 2017, reserve additions increased dramatically, with an improved price environment. The report said capital expenditure levels far below the 2014 spending peak were “sufficient to maintain production at near-record levels.”

Source: Chart created using data published for 50 U.S. oil and gas companies in EY’s US oil and gas reserves and production study for 2018.

Sustaining the surge were dramatic improvements in cost efficiency: between 2014 and 2017, the amount of capital dollars required to add a barrel of reserves fell by more than half, from US$16.79/boe to US$6.62/boe for the study group.

“Some of that reduction is due to efficiency improvement and is sustainable; however, some of the reduction is due to service cost reduction and cannot be sustained without continued stress on the service sector due to increasing costs of labour and services,” the EY study says.

Evaluate Energy holds operating cost and capital spending data for every U.S. E&P company, as well as for hundreds of significant oil and gas producers around the world. For a demo of Evaluate Energy, click here.

For the full EY report, click here. The report uses Evaluate Energy data to analyse production, reserve and operating cost changes over a 5-year period.

Notes

1) The 50 companies are the 50 largest in the U.S. based on 2017 end-of-year oil and gas reserve estimates. The study companies cover approximately 44% of the U.S. combined oil and gas production for 2017.

Nine things we learned from EY’s new production and reserves study

A new EY study based on Evaluate Energy data analyses the data from the 50 largest U.S. oil and gas companies (see notes) between 2013 and 2017. The full EY study can be downloaded here. For a demonstration of Evaluate Energy, where the raw data was extracted from, please click here.

Here are nine things we learned from the study:

1. The 50 U.S. companies saw revenues and results of operations increase as commodity prices improved during 2017. Revenues in 2017 were US$135.9 billion, up 32% from 2016 and the highest since 2014.

2. The 50 companies continued optimizing their portfolios and cost structures amid the uncertainty surrounding prices throughout the downturn.


Source: Chart created using data published for 50 U.S. oil and gas companies in EY’s US oil and gas reserves and production study for 2018.

3. Capital expenditures totalled US$114.5 billion in 2017, 32% higher than 2016 and 2% lower than 2015. “Growth is observed in all categories of spend. Development and exploration spend increased the most by 49% and 30%, respectively,” the report said.

4. The studied companies drilled 30% and 23% more development and exploration wells, respectively, compared to 2016.

5. Impairments in 2017 were US$10.2 billion, a 47% reduction from 2016 and the lowest since 2013 as the study companies’ outlook of future prices further stabilized.

6. Depreciation, depletion and amortization (DD&A) expenses decreased, mainly due to lower unit-of-production rates, which resulted from reserve revisions and dispositions as well as higher impairments in prior periods.

7. After-tax earnings of US$17.2 billion in 2017 were a substantial improvement from US$33.8 billion in net losses in 2016 and the first combined net income position since 2014.

8. Oil production increased 5% from 2.3 billion bbls in 2016 to 2.4 billion in 2017. The 2017 figure represents a 35% increase from 2013 to 2017. Natural gas production fell in 2017, but this was mainly due to sales of assets to companies outside of the study group.

9. Oil reserves for the study companies increased 21% in 2017 due to significant extensions and discoveries, net upward revisions and purchases partially offset by production and sales. End-of-year gas reserves for the study companies increased 19% in 2017 to 176 tcf, marking the highest level of gas reserves since 2014.

Notes

The 50 companies are the 50 largest in the U.S. based on 2017 end-of-year oil and gas reserve estimates. The study companies cover approximately 44% of the U.S. combined oil and gas production for 2017.

U.S. producers expect 7% uptick in 2018 – new guidance data

Worldwide production by U.S.-based upstream public companies is set to increase by seven per cent in 2018, based on the latest guidance.

This is according to Evaluate Energy’s new North American guidance database, which holds guidance data for production, capex budgets and drilling plans for all U.S. and Canadian publicly listed companies. Click here for more on the data available.

So far, 80 public companies based in the U.S. have reported production guidance for 2018. Of that number, 58 companies expect volumes to grow year-over-year. The combined total is currently expected to reach 12.7 million boe/d – a significant uptick over 2017’s actual production of 11.8 million boe/d for the same group of companies.

In June, 20 of these 80 U.S.-based producers provided an update on their production guidance for 2018, accounting for 285,000 boe/d (32%) of the expected uptick.

19 of the 20 companies to provide new, updated or reaffirmed guidance for 2018 production expect to record an increase in output during 2018, compared to reported full-year averages in 2017.

The largest of these 19 increases was 74%, reported by Jagged Peak Energy Inc. Jagged Peak is a Permian-focused producer in the Delaware Basin. The company expects to see production average around 29,500 boe/d in 2018 on the back of a robust capital spending plan that includes a drilling and completion budget of between US$540-590 million and between 48-55 new gross wells brought online this year.
The only company of the 20 that expects a drop in production in 2018 is QEP Resources Inc. QEP’s latest guidance is just over 137,000 boe/d, a six per cent fall on the 146,000 boe/d recorded by the company in 2017. This drop is mainly due to the US$777.5 million sale of producing assets in Wyoming in September last year.

Source: Evaluate Energy North American Guidance

Evaluate Energy and CanOils now provide all upstream guidance for public companies across North America as part of the new guidance product. For a full demonstration click here.

Mexico energy reforms spur Pemex deals and outside investment

Falling production, rising debt and reduced reserve life were among the chief issues facing Pemex, Mexico’s national oil company. Historic reforms were introduced by Mexico’s government in 2013 to try and spark a significant reversal in performance of both Pemex and the country’s hydrocarbon production as a whole.

That is among the key findings of a new report published by the Daily Oil Bulletin, Sproule and Evaluate Energy. A fundamental goal of Mexico’s energy reforms, which began in 2013, was to drastically improve the fortunes of Pemex. Pemex is a key source of government income and the company faced challenging times in recent years:

  • Production dropped by 32% in the past 10 years
  • Proved reserve life1 halved between 2000-2016
  • Debt increased to almost $100 billion by the end of 2016

Aside from reducing the company’s heavy tax burden and pension liabilities, the reforms allow Pemex to pursue outside investment via joint ventures and to join consortiums bidding for new acreage.
Full details on the reforms are available in the report, which can be downloaded here.

Pemex has sought partners to create joint ventures on key development opportunities that previously it could not tackle alone. Encouragingly, it has now agreed to three deals worth a combined $1.2 billion in cash, cost carries and cost reimbursements.

At the end of 2016, Pemex also began participating in Mexico’s bid rounds for the first time. In the country’s first deepwater bid round (1.4), the company won one block in partnership with Chevron Corp. and Japan’s Inpex Corp. A few months later, Pemex secured two shallow water blocks, one in partnership with Colombia’s Ecopetrol and the other with Germany’s DEA Deutsche Erdoel AG, as part of the shallow water round 2.1. In early 2018, in the deepwater round 2.4 and the shallow water round 3.1, the company was awarded 11 further blocks. A handful of these were awarded to Pemex as the sole bidder while others saw Pemex win via more consortiums – providing Pemex with additional very experienced, successful and deep-pocketed international explorers as partners. The companies, along with the number of blocks Pemex will partner with them on, are listed below.

Source: “Mexico – How evolving energy reforms are driving foreign investment

The new report from Evaluate Energy, Sproule and the Daily Oil Bulletin also focuses on:

  • The main amendments to Mexico’s constitution, administrative agencies and regulatory systems
  • All winners and key trends in nine bid rounds to date
  • The recent success and challenges faced by neighbouring nations

Download the report at this link.

Notes:
1) “Proved reserve life” is the number of years at current production levels it would take to deplete all proved reserves.

Bid rounds give both Mexico and Brazil strong starts to 2018

Successful bid rounds in Mexico and Brazil during Q1 secured $3.1 billion in cash – a huge step forward for both countries in securing global interest in offshore development.

Brazil 15th bid round in March was responsible for 79% of this value, with huge individual bids from ExxonMobil, Petrobras and Norway’s Statoil. Mexico’s deepwater Round 2.4 (January) and shallow water Round 3.1 (March) drew $649 million in cash bids combined.

A new report released by Evaluate Energy, Sproule and the Daily Oil Bulletin shows that while Brazil’s round drew larger cash bids, significant changes within Mexico’s oil and gas market are having a profound impact:

  • The $525 million generated in Round 2.4 was a huge step forward from Mexico’s seven previous rounds, where only a handful of blocks drew any kind of cash bid.
  • Both rounds drew keen interest from huge oil and gas companies that can invest anywhere in the world but chose Mexico’s high potential deepwater assets. The biggest winner among the companies involved in Round 2.4 was Royal Dutch Shell, a company with vast deepwater Gulf of Mexico experience and recent discoveries. Petronas, Total and Repsol were among the other key winners; and
  • All eight blocks on offer in the Southeast basin drew multiple bids in Round 3.1. Block 30, eventually won by Germany’s DEA Deutsche Erdoel AG, the U.K.’s Premier Oil and Malaysia’s Sapura E&P, was the most competitive and received seven separate bids.

Source: “Mexico – How evolving energy reforms are driving foreign investment

The main goals of Mexico’s energy reforms, which were instigated in 2013 and are detailed within the report, have been to inject competition into the upstream sector. It cannot be denied that this has been achieved so far.

The changes are also reshaping how Pemex, which has previously monopolised activity, operates within this altered marketplace. For sure, the company is still winning blocks ¬– four new blocks in Round 2.4, and seven new blocks in Round 3.1. But of the 11 blocks won by Pemex, nine were as part of a consortium and six were won by defeating a rival bid.

Full results and analysis of the key awards in all three rounds is available in the report, which can be downloaded here.

How Mexico is attracting major explorers to E&P projects

Nearly 70 companies ­have entered the fray since Mexico opened up its E&P market ­– among them Royal Dutch Shell, Petronas and Total.

The inaugural bidding rounds follow key constitutional reforms enacted in 2013 to end national oil company Pemex’s 75 year monopoly and accelerate investment in its untapped onshore and offshore areas. Competition in the sector is now rife, with international companies investing heavily in offshore areas in particular.

Details of the bids, the key players involved and the implications for Pemex are contained in a new report that examines the early impact of Mexico’s energy reforms. The report is authored by Evaluate Energy, Sproule and the Daily Oil Bulletin. The report is available at this link

The biggest early mover is Shell. It has secured the most new blocks (11 to date) among international companies. Nine of these were awarded in Round 2.4, which was held in January 2018 and focused on deepwater areas. Shell dominated that particular round, securing four of its new blocks with solo bids, and partnering with Pemex and Qatar Petroleum on others. Later, in March, Shell also secured a shallow water block in Round 3.1 with Pemex. No single international company is dominant in the sector.

Malaysia’s Petronas ranks just behind Shell with nine blocks and has focused on deepwater assets too. European producers Repsol and Total have collected a number of both shallow and deepwater blocks, while Italy’s Eni and the U.K.’s Premier Oil are the most active international companies in Mexico’s shallow water areas with interests in five blocks apiece.

Source: “Mexico: How evolving energy reforms are driving foreign investment” – download here

 

Shell has sold US$27 billion in assets since acquiring BG Group

Since agreeing the largest single upstream-centric deal of the past 10 years to purchase BG Group back in April 2015, Royal Dutch Shell has been selling assets all over the world to rationalize its portfolio.

Including this week’s US$750 million sale of an offshore shallow water gas field in Thailand, the company has now agreed sales of assets and business units for a grand total of just under US$27 billion between April 8, 2015 – the day the BG deal was first announced – and January 31, 2018.

According to data available in Evaluate Energy’s M&A database, Shell has been involved in 48 separate asset sales since the BG announcement, five of which were agreed for a value of over US$1 billion. From the Canadian oilsands to pipelines in the U.S. and chemical businesses in Saudi Arabia, the company’s sales have taken place all over the world and in a variety of business segments.

In terms of deal value, at US$9.4 billion it was Canada that saw the highest amount accumulated in asset or business unit sales by Shell since April 2015. The majority of this value revolves around the US$8.3 billion sale of a 60% stake in the Athabasca Oil Sands Project to Canadian Natural Resources in March last year. This is still the largest individual sale that Shell has made since acquiring BG.

The United States, where 11 Shell sales took place, saw the highest number of individual deals agreed, ahead of the UK with eight and Canada with five.

This US$27 billion is also probably just the tip of the iceberg; of the 48 individual divestitures Shell has agreed to since April 2015, the acquisition cost for 19 of them remained confidential. A number of these involved the kinds of assets that would normally change hands for sizeable sums, including the sale of stakes in an Iraqi oil field, a Chinese lubricants business and a Malaysian LNG export facility.

For more on Shell’s asset divestments and indeed any acquisitions made over the past 10 years, request a demonstration of Evaluate Energy’s M&A database at this link.

Top 5 Shell divestitures since April 8, 2015 by reported value 

Source: Evaluate Energy M&A Database

Notes to charts:

1) In deals with multiple countries or segments involved, a deal was assigned to a country and a business segment according to where the majority of the value was estimated to reside.
2) Deals were assigned to a time period based on the deal announcement date.
3) Deals in the midstream segment include deals for LNG, pipelines, storage, terminal assets and processing facilities. Deals in the downstream segment include deals for refineries, service stations, chemical production facilities and oil product marketing assets.

Canadian companies hedged almost 1.1 million bbl/d of oil in Q4

On the eve of TSX annual results for 2017 being released, new data from CanOils reveals that almost 1.1 million barrels per day of oil and NGL were covered by hedging contracts in the fourth quarter.

Cenovus Energy Inc. led the way with 299,000 bbl/d of oil and NGLs hedged heading into Q4 2017. Encana Corp. was the largest natural gas hedger with contracts in place for 865 mmcf/d of natural gas in Q4 (a volume equivalent to 92% of its Q3 2017 gas production).

By isolating hedging details released by Canadian E&P companies in Q3 filings, CanOils identified a group of 62 ‘active hedgers’. CanOils defines this group as companies heading to the next reporting period with more than 10% of their production portfolio under hedging contracts.

Combined, these ‘active hedgers’ had 1.1 million bbl/d of oil and NGLs plus 4.8 bcf/d of natural gas volumes under hedging contracts heading into the fourth quarter – a combined total of almost 1.9 million boe/d hedged. This is a 35% increase on volumes hedged by the equivalent group of hedgers from this time last year (see note 1).

The CanOils hedging database enables contract-by-contract analysis of every hedging contract put in place by Canadian-listed upstream companies. Users can dissect the terms of every active hedging contract and review locked-in oil and gas sales prices years into the future. To request a demo of the database, click here.

Source: CanOils Hedging Database – All hedging figures for the above periods are sourced from Q3 2016 and Q3 2017 reports, respectively.

Top 10 Canadian-listed active hedgers in Q4 2017, by combined oil, gas and NGL volumes hedged

Source: CanOils Hedging Database

Notes

1) The group of ‘active hedgers’ altered significantly since this time last year. Nine companies joined the group having either adjusted their strategies to cover more than 10% of their portfolios with hedging contracts or having been created between the two time periods. Six companies departed the group between Q4 2016 and Q4 2017 due either to corporate sales processes, stock market de-listings or changes in hedging strategy. The groups for both time periods include Canadian-listed companies that have their entire production base overseas.

  • New companies: Athabasca Oil Corp., Birchcliff Energy Ltd., Chinook Energy Inc., Hemisphere Energy Corp., Pine Cliff Energy Ltd., Pinedale Energy Ltd, Razor Energy Corp., TransGlobe Energy Corp., Zargon Oil & Gas Ltd.
  • Removed companies: Ithaca Energy Inc., Kelt Exploration Ltd., PetroShale Inc., Questfire Energy Corp., Rooster Energy Ltd., Trilogy Energy Corp.

2) MEG Energy Corp. also hedged 15,150 bbl/d in condensate purchases heading into Q4 related to its diluent needs. These volumes are not included in this table, but details on the contract and similar contracts for other companies are accessible via a CanOils subscription.

Why major investors are now being drawn to Mexico’s oil sector

Mexico’s abundant on-shore and offshore basins are now starting to attract significant independent and foreign investment.

Fuelled by Mexico’s energy reforms, enacted in 2014, 2017 saw more than $800 million in upstream deals agreed by state-controlled Pemex to form joint ventures on a handful of major projects. Several successful licensing rounds were also completed.

This sudden flood of activity means that only Brazil, Argentina and Colombia have seen more deals in pure dollar terms since 2014, according to a new report released in partnership by the Daily Oil Bulletin, Evaluate Energy and Sproule. Entitled Latin America: Assessing the impact of oil prices, energy reforms and national oil companies on deal activity, the report is available for download here.

Source: Latin America: Assessing the impact of oil prices, energy reforms and national oil companies on deal activity

The new report shows that while Brazil and Argentina lead by far with US$12.9 billion and US$7.8 billion in upstream sector deals since the start of 2014, respectively, Mexico is suddenly only slightly behind Colombia in fourth place in the rankings over the full four-year timeframe after this busy year of deals since the end of 2016. If the momentum achieved in 2017 continues, Mexico can expect significant additional investment over the next 11 months.

“Touted as having one of the best energy futures of any developing nation, Mexico has abundant untapped potential in both onshore and offshore basins, including virtually untouched unconventional resources,” said Jim Chisholm, report co-author and Vice President, Latin America, at Sproule.

“Since these reforms began, the country has been hard at work attracting foreign investment and continuing to build a robust regulatory and investment environment to support future growth.”

For more information on upstream M&A activity in Mexico, including details on the seven stages of license awards, Pemex’s US$800 million in joint arrangements and an overview of the licensing award schedule for 2018 and beyond, download the full report from the Daily Oil Bulletin, Evaluate Energy and Sproule at this link.

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