Skip to comments.Big Oil Spending More, Getting Less in Production
Posted on 05/27/2014 11:15:13 AM PDT by thackney
Despite increased spending, oil majors are seeing flat or declining production as they struggle to replace reserves, according to a recent analyst report.
Exxon Mobil Corp., Chevron Corp., Royalty Dutch Shell plc and BP plc recorded declines in their 2013 production. ExxonMobil reported an average production of 4,175 million barrels of oil equivalent per day (MMboepd), down 1.5 percent from 2012, and Chevron saw its production decline by .5 percent from 2012 to 2013 to 2,597 MMboepd. Shells average 3,199 MMboepd of production for 2013 was down 1.9 percent from 2012 levels, while BP saw its production volumes fall to 2,256 MMboepd, or 2.7 percent, from 2012 to 2013.
Frances Total S.A. was the only company to buck the trend in declining production, with average hydrocarbon production in 2013 of 2,299 MMboepd, Zacks Equity research analyst Nilanjan Choudhury said in a May 16 report.
But overall, most Big Oil is suffering from marginal or falling returns even as crude prices stay strong, reflecting their struggle to replace reserves, as access to new energy resources becomes more difficult, said Choudhury. As it is, given their large base, achieving growth in oil and natural gas production has been a challenge for these companies over the last many years.
Rising capital expenses also are hurting the oil majors. Despite capital budgets of anywhere from $25 billion for BP and Total each to the $37 billion and $40 billion that Shell, ExxonMobil and Chevron plan to spend this year, these expenditures are not augmenting output.
Choudhury recommended that oil majors such as ExxonMobil and Shell curb their future spending, noting that indications are appearing that drilling expenditures have peaked, with huge budgetary jumps likely to be a thing of the past.
The inability of these firms to generate enough cash from operations to address their rising spending and shareholder payouts has forced most of them to take on more debt.
Though the situation is no cause for alarm, it does raise some questions regarding the companies ability to finance shareholder returns, Choudhury commented. Notwithstanding the fact that almost all components of Big Oil hiked their dividends recently, there is no doubt their balance sheets are under pressure from spiraling capital spending and shareholder distributions.
To maintain production rates, oil companies have had to race to find new reserves faster than the old ones dry up, Bloomberg reported in January of this year. That essentially puts them on a treadmill at which they must run faster just to keep pace a horrible problem in any business. As a result, majors are making significant investments in costly megaprojects such as Shells Prelude floating liquefied natural gas.
The fact that the oil and gas majors entered U.S. shale plays late also has contributed to the problem, according to Bloomberg. Many companies pulled out of the United States to explore in places such as Africa and Asia, leaving smaller companies positioned to acquire North Americas shale assets cheaply. The timing of shale deals has proved difficult for the majors such as ExxonMobil, who acquired XTO Energy Inc. for $41 billion in 2010, right before natural gas prices declined.
Shell announced earlier this month that it would sell its Eagle Ford asset stake to Sanchez Energy. The company has also divested interests in other North American shale plays, with planned divestments for 2014 and 2015 to reach $15 billion, as it seeks to restructure its North America portfolio to enhance profitability.
Shakeout threatens shale patch as frackers go for broke
...Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.s 0.1 percent.
...Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that cant afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.
Maybe prices will stay up or even go up a little to facilitate further production, practice and re-engineering. Further development of the technologies involved is much needed for more stability and lower prices in the near future.
Old time pilots call this “getting behind the power curve”.
It is common knowledge that the low hanging fruit of easy oil is gradually disappearing, thus precipitating the production drops. Those who won't adapt, won't survive.
Reversing entropy? You dream big.
While creating long complex hydrocarbons from short simple hydrocarbons can be done, it isn't cheap.
Results may look the same...
I have questioned the economics of the horizontal drilling from the beginning given the steep decline rates. Of course this is antidotal, but my first experiance with a horozonal well was one where I had a royalty interest. I owned only 5 acres and my first months run check was $1200 and I thought this is great. Problem was that was also the last check.
Of course the stage fracking technolgy has improved things, but can the technolgy improvements keep up with the fact that oil and gas will continue to get harder to find and produce?
You are correct. That is why I said almost. :) And yes it won't be cheap, especially at first. But as it becomes more and more difficult and expensive to extract oil, and as long as we have powerful enemies in the so called green movement, these options will eventually pay off like slots.
Think about it, long chain =C= 's are already created in cracking processes (up t 10%) from Ethane and Propane. You never know what capabilities that new catalytic technologies may open.
That is why the majors who went "all in" in NG are snickering. What was seen to be a bust with low recent NG prices, may be the future savior of the industry.
Cracking takes longer chain molecules and makes smaller ones. That is where the name comes from, the molecules are cracked apart into smaller ones.
Uh...no. Look up how ethylene is made. Ethane and propane are typical feedstocks and resultant cracked materials are ethylene, propylene, butylene, benzene, toluene, etc. etc. down to about C20. The units that make these products are colloquially also called crackers. I think the term cracking has nothing to do with the direction of the new created carbon size, but more the "cracking" of the bonds to may new chemicals.
sorry typo.. may = make
Sorry, I thought you were talking about oil refinery cracking.
You are right. That is the case in refineries.
Yes, I can say with 100% certainty that there are also C4’s and byproducts from C2, and C3 cracking. Even your own chart shows these (C2,C3 as examples) creating Aromatic products, which are all at least C8.
I am retired, but I will say that in my life I have seen literally 1000’s of GCMS scans of cracked gas. Believe me, there is a rainbow of hydrocarbons easily C1-C20.
H3C-CH3 ethane becomes H2C=CH2 ethene/ethylene
The same process to produce propene/propylene from propane. Or Butene/butylene from butane
You do. The high temperatures in the cracker creates the double bonding as you describe. However, there are a lot of other cats and dogs and isomers of cats and dogs made in the process too.
If you crack the naptha, you come up with a mix of alkenes which would include ethene/ethylene, propene/propylene, and butene/butylene, and perhaps some of longer chains, which must then be separated?
Cracking liquids will yield the full hydrocarbon spectra, except with a lot more heavies obviously. The cracked mixture then goes through a series of towers which each fraction C2=, C3=, etc. is extracted for purification.
Are you referring to thermaldepolymerization type methods?
Is the input to the plant a Y grade NGLs or is it ethane from downstream of a fractionator?
I found what I was searching for, supporting what you told me. The attached link show a process making the olfin conversions for the different feedstocks and ratio of heavier products produced.
Thanks again for the info:
Table 1.1: Typical Product Streams Obtained from Cracking Various Ethylene Plant Feedstocks