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Worldwide Oil and Gas Reserves Rise While Profits Fall

Date: 12/15/2014
Source: EY
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..

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.

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 1.68 trillion cubic meters. 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.

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.


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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.

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About EY Romania
EY is one of the world's leading professional services firms with approximately 190,000 employees in 700 offices across 150 countries, and revenues of approximately $27.4 billion in the fiscal year that ended on 30 June 2014. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 500 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please vi

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