‘Staggering’ U.S. E&P Reserve Revisions in 2015 Eliminated 40 Tcf, 4.1 Billion Bbl

The 50 largest U.S. producers last year saw their revenues and capital spending plunge, as they attempted to cope in the first full year since 2004 that West Texas Intermediate oil spot prices averaged under $60/bbl, Ernst & Young LLP said.

The firm’s annual U.S. oil and gas reserves study, issued Tuesday in Houston, found that exploration and production (E&P) companies overall reported total capital expenditures in 2015 of $117.5 billion, off 41% from $199.8 billion in 2014. A decline of that magnitude last occurred in 2009 during the global financial crisis. By comparison, spending totaled $166.7 billion in 2013, $180.1 billion in 2012 and $149.8 billion in 2011.

Combined gas and oil production increased 6% year/year, with natural gas output rising 2% to 13.6 Tcf and oil climbing 10% to 2.4 billion bbl. However, “staggering downward reserve revisions” removed 40 Tcf of natural gas and 4.1 billion bbl of oil. End-of-year gas reserves fell 21% to 147 Tcf, while oil reserves declined 12% to 24.1 billion bbl. Additionally, property impairments, including ceiling test charges, were recorded by 44 of the 50 E&Ps and totaled $141.8 billion.

“The significant spending cuts and downward reserve revisions reported in 2015 are illustrative of a structural shift taking place in the industry as a result of abundant oil,” said EY’s Herb Listen, assurance oil and gas leader in the United States. “No longer are capital investment decisions driven by the pursuit of growth; instead the industry and those investing in it are progressively more focused on cash flow and returns.”

The analysis, which represents results from 2011-2015 for the 50 largest publicly traded E&Ps, relied on 2015 year-end reserves estimates for integrateds (8% of the total), large independents (32%) and independents (58%). Based on total reserves at the end of 2015, integrateds held one-quarter (24%), as did independents (25%), with large independents holding about half (51%).



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