The Gist: (1) In 2023 Supermajors real capex per boe, a metric for capital intensity, continued to rise. Next up we watch the U.S. E&Ps. (2) When the 10-Ks are released be on the lookout for the following metrics; well productivity, F&D, and estimated future production and development costs of existing reserves. (3) Insert evil villain laugh, “WHAHAHAHAHAHA”
All of the major integrated oil companies (aka supermajors) reported 2023 results so I updated the following chart; real upstream capex per boe of production.
This chart shows us when the capital intensity cycle makes an inflection.
Two years ago, it reached a low point, suggesting that the industry is depending on a more expensive barrel to fulfill increasing demand, indicating a positive outlook for oil in the long run.
Let’s focus on the bottom section of the chart which is the average of all these companies.
Going back to the 1950s-1960s, the industry made efficiency gains as Middle East and N. African production ramped up. Then capex per boe started to turn in 1970, well before the 1973-74 oil embargo. Nationalization of assets occured and the industry had to develop higher cost basins like Alaska N. Slope, the N. Sea (HERE), Gulf of Mexico, and Canadian Oil Sands (HERE).
Fast forward to the mid-1990s and the capital efficiency cycle turned yet again, well before the events of 9/11 and the Global War on Terror. The industry had to develop high-cost Australian LNG, oil sands, deep water, and then for a time very high-cost N. American shales.
In 2014, real capex per boe turned down as the industry became very efficient with developing shales. The productivity cycle led to structurally lower oil prices.
That all changed in 2020.
When I included this chart in my mid-year capex review for 2023 (HERE), the figure was around $11.2/boe, but it appears it will exceed $12 per BOE, confirming that the trend remains favorable.
The ever-important North American oil E&Ps will start to report over the coming weeks so we will see how their chart below develops.
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