Posted on 10/13/2015 5:48:44 AM PDT by thackney
The hunt for new stores of oil and gas has been dramatically curtailed amid a global crude slump, with exploration budgets at the largest oil companies cut in half from their peak levels in 2013, according to a new analysis.
Investment banking firm Tudor, Pickering, Holt & Co., which tracked exploration capital spending at integrated oil companies and major exploration and production companies, forecast that spending will fall to $25 billion next year, down from the $50 billion these same companies spent three years ago.
Oil companies are spending less in part because service costs have tumbled alongside oil prices, allowing explorers to spend less money to search for new reservoirs. But a vast majority of the spending cuts are related to a pullback in activity, according to the Tudor, Pickering, Holt & Co. analysis released to investors Monday.
“Many (exploration and production) companies are virtually abandoning exploration altogether, especially in the U.S.,” the analysts wrote.
Recent auctions for oil and gas leases have attracted little interest, the analysts said. In July, Mexico sold leases for two of its 14 offshore blocks on auction, a poor showing as the country attempts to end a 76-year state monopoly on its oil and gas reserves by opening up exploration to private firms. A lease sale for the western Gulf of Mexico in April similarly failed to drum up much interest, attracting only five companies who purchased just 33 leases, the smallest such sale for the region in more than 30 years. Bid value had fallen 80 percent in a single year, Tudor, Pickering, Holt & Co. analysts wrote.
As oil companies pull back from exploration, they are poised to produce less oil in the coming years. Big Oil companies closely tracked by the investment banking firm are finding less than half the 8 billion barrels of oil equivalent per day that they currently produce, a trend that should help reduce the tidal wave of crude flooding the market and keeping prices depressed.
“There is not enough existing discovered resource and U.S. shale to sustainably grow production over the next decade, and it takes five years in the best case, and generally closer to 10 years to take a major conventional discovery into production,” the analysts wrote.
Domestic benchmark oil, which has been trading below $50 a barrel since July, was down 81 cents to $48.82 Monday morning on the New York Mercantile Exchange.
The sharp reduction in exploration spending spells good news for exploration and production companies with good portfolios, including those with acreage in the oil-rich Permian Basin but seismic companies, drillers and other service providers that rely on exploration work should brace for more tough times, the analysts wrote.
And yet... North Dakota earthquakes remain zero, while Oklahoma and Kansas earthquakes are steady at nearly a dozen/day.
Fracking, yo.
When the price goes back up, they’ll start looking again. Technology is not standing still. People are still designing new methods of looking.
Also, they’ve found so much that when the conditions are right, they’ll go back and get it. This is the market in action. Be calm. When it’s time to panic, I’ll post...PANIC!! (One exclamation mark means that Democrats have taken over two branches of government. Two mean they’ve taken three branches. Three mean they are promising us world peace.)
The BP disaster left quite a bad taste in the mouth of many. If the right to sell American oil overseas is resumed prices will stay low for a long time depending on government manipulation and easy oil ready to pump. Gasoline prices are easily manipulated and may not go down much.
Until there is some financial incentive (like rising oil prices) there will be little inclination to, well, throw money into the ground.
Of course the fact there is really little exploration or exploitation of existing sources, will eventually reduce the glut and prices will rise. But allowing the US to export some amount of its domestic production would help to reduce this glut, and change the economics of drilling and extraction within our own borders.
Supply and demand.
Learn to love it.
Yep, demand is still rising, although slower.
OPEC is raising supply to meet that demand.
kinda reminds of ‘86....workin offshore in the GOM....Rowan had up to a dozen rigs hot stacked off of Galveston and Sabine for a few years......pretty much every one else hot/cold stacked from Venice to Corpus...we shall see this time with exploration....lotta changes in the last 30 years..
ROI - return on investment If it ain’t there you don’t drill.
I think 2013 levels, which were an historical aberration are not really the best barometer of oil exploration.
They did say it was the peak.
Current levels will continue to result in less supply and future higher prices.
The industry lags the prices. Consequently the roller coaster ride continues...
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