Eight major oil and gas companies in a comparative analysis by Prudential Equity Group LLC together replaced 134% of their production during 1999-2003 at an average cost of $5.18/boe.
The average price of West Texas Intermediate crude oil during that period was $26.50/bbl, the New York firm said. The US natural gas price averaged $3.80/Mcf.
During the 5-year study period, the companies spent $242 billion to find, develop, and acquire oil and gas reserves. They earned an average of $5.82/boe produced and generated upstream cash flow of $10.02/boe.
The study, reported by Prudential analyst Michael Mayer, ranks the eight companies in each of six criteria: production income, quality of earnings, production replacement ratios excluding acquisitions and divestments, finding and development costs including acquisitions and divestments, discounted future net cash flow, and upstream returns.
The study also provides an overall ranking based on the average of the rankings by the individual criteria.
BP PLC ranked first in the overall ranking, followed in order by ExxonMobil Corp., Total SA, ConocoPhillips, ChevronTexaco Corp., Marathon Oil Corp., Royal Dutch/Shell Group, and Amerada Hess Corp.
BP ranked first in three individual categories: production replacement ratio, finding and development costs, and upstream returns. ExxonMobil ranked first in production income and quality of earnings (the extent to which net negative special items reduced earnings).
Prudential attributed the rankings of the bottom three majors mainly to high finding and development costs and poor reserve replacement records and, for Amerada Hess and Marathon, above-average charges against earnings for nonrecurring or special items.
The study notes an increase in production costs during the last 4 years and attributes it to "significantly higher commodity prices." Production costs fell through most of the 1990s, bottoming in 1999.
Tending to raise production costs during the past 5-10 years, the study says, are declining production from large, mature fields; efforts to slow production declines, such as increases in numbers of wells drilled, increased maintenance, and improved recovery; and new environmental and safety regulations and taxes.
