O&G Industry F&D Costs - 2022 data dropping late in 2023

Half the fun in doing this blog is coming up with titles - Some are good and some stink. I’ll let you decide where this week’s title stacks up.

This post was supposed to go out earlier this year after the publication of 10Ks but I wanted to wait until after I launched paid subscriptions because the amount of data involved is GINORMOUS!

This is my annual update to finding & development (F&D) costs that I have gathered for dozens and dozens of companies going back to 1978 (the year when reserve requirements were first required).

Before we get started here is how I classify the companies:

• Supermajors - XOM, CVX, BP, SHEL, TTE & EQNR

• Oil-focused E&Ps - COP, OXY, EOG, PXD, CLR, MRO, HES, DVN, FANG, APA

• Gas-focused E&Ps - EQT, CHK, AR, CTRA, RRC

As always, acquired companies are included so the Mobil data is in there with Exxon, Texaco with Chevron, and even Boone Picken’s Mesa is in there with PXD, etc.

In this post, I provide

1. A quick recap on the last half century of oil & gas finding & development costs.

2. A quick 101 on Oil & Gas reserve accounting (fun stuff).

3. How the finding & development (F&D) numbers shook out in 2022.

4. Show how exploration budgets got a bigger piece of the pie in 2022 and who benefits.

OK, Let’s jump right in.

A quick recap on the last half century of oil & gas finding & development costs

At their height, the Supermajors controlled over 50% of global oil production.

Data includes all acquired companies.

But the 1970s would lead to one of the largest transfers of wealth in modern history as nationalization took hold and the control of reserves was passed from the Supermajors to the governments wherein the resources lay.

From there, the companies had to find reserves elsewhere and did so in a way that would dramatically reduce their finding & development costs from ~$30/boe in the early 1980s to ~$10/boe by the late 1990s.

For these low-cost barrels, the supermajors were rewarded with a high multiple relative to the capital employed.

Most of these barrels were acquired from the Former Soviet Union, Venezuela as well as some Canadian oil sands.

During the 2000s cycle, returns on capital increased significantly as a result of the super cycle commodity prices for cheaper barrels that were discovered, developed, and booked in the previous decade.

The following chart includes not just the supermajors but also the oil & gas E&Ps that rose in the 2000s shale cycle.