Exploring Hydrocarbon Depletion
Exxon’s answer to the SEC boils down to this: Yes, low gas prices hurt in 2012, but the pain was fleeting and the future looks a lot better.
To put a value on wells that pump oil and gas for decades, Exxon argued in its response to the SEC, it has to factor in things that haven’t happened yet. For instance, Exxon pointed out that the U.S. is poised to export a significant amount of natural gas overseas, which could boost prices for the fuel.
Exxon also told the SEC it didn’t test the value of its shale holdings in 2012, because low commodity prices in the short term don’t justify such an exercise. Last month, natural-gas prices rose to their highest level since June 2010.
IRVING, Texas--(BUSINESS WIRE)--Exxon Mobil Corporation (NYSE:XOM) said today it added 1 billion oil-equivalent barrels of proved oil and gas reserves in 2015, replacing 67 percent of production, including a 219 percent replacement ratio for crude oil and other liquids.
At year-end 2015, ExxonMobil's proved reserves totaled 24.8 billion oil-equivalent barrels. Liquids represented 59 percent of proved reserves, up from 54 percent in 2014. ExxonMobil’s reserves life at current production rates is 16 years.
In 2015, reserves were added in Abu Dhabi, Canada, Kazakhstan and Angola. Liquid additions during 2015 totaled 1.9 billion barrels. Natural gas proved reserves were reduced by 834 million oil-equivalent barrels primarily in the United States reflecting the change in natural gas prices. The company expects this gas to be developed and booked as proved reserves in the future.
Over the past 10 years, ExxonMobil has replaced 115 percent of the reserves it produced, including the impact of asset sales.
“ExxonMobil has a successful track record of proved reserves replacement over the long term, demonstrating the strength of our global strategy to identify, evaluate, capture and advance high-quality opportunities,” said Rex W. Tillerson, chairman and chief executive officer.
“Our proved reserves represent a diverse portfolio that positions us to create shareholder value as we supply long-term energy demand growth. We will continue to apply our disciplined, paced investing approach as we develop our industry-leading resource base.”
Reserves additions in 2015 reflect new developments as well as revisions and extensions of existing fields resulting from drilling, studies and analysis of reservoir performance. The annual reporting of proved reserves is the product of the corporation’s long-standing, rigorous process that ensures consistency and management accountability in all reserves bookings. Consistent with SEC requirements, ExxonMobil reports reserves based on the historic average market prices on the first day of each calendar month during the year.
During 2015, ExxonMobil added 1.4 billion oil-equivalent barrels to its resource base through by-the-bit exploration discoveries, undeveloped resource additions and strategic acquisitions.
ExxonMobil’s by-the-bit exploration success in 2015 included a significant oil discovery offshore Guyana and additional discoveries in Iraq, Australia, Romania and Nigeria. Strategic unconventional resource additions were made in the Permian Basin in West Texas, Canada and Argentina.
Overall, the corporation’s resource base totaled more than 91 billion oil-equivalent barrels at year-end 2015, taking into account field revisions, production and asset sales. The resource base includes proved reserves, plus other discovered resources that are expected to be ultimately recovered.
CAUTIONARY NOTE: Proved reserve figures in this release are based on current SEC definitions. Reserves also include oil sands and equity company reserves for all periods, which were excluded from SEC reserves prior to 2009.
About half of some 32 oilfield service companies still trading actively in major stock exchanges are distressed, including five or six that are severely distressed and likely to restructure, said Kim Brady, a partner and restructuring adviser at financial consultancy Solic Capital.
Restructuring advisers said the stigma previously associated with Chapter 11, which tended to hit companies with serious problems, has vanished, opening the door to more bankruptcy filings.
"Now it's almost in vogue to be going through Chapter 11," said Jerrit Coward, former CEO of fracking services provider US Shale Solutions LLC who is now advising energy investors.
"There were no discoveries because there is no money for exploration. You find something if you look for it," he said.
Global tightness in oil supply could be felt within two to three years, Birol predicted, echoing similar comments at the energy form Thursday by Saudi energy minister Khalid al-Falih.
"In 2017 we have to see major new investment to calm the market, otherwise, in two to three years, that supply-demand gap will be with us," he said.
Nonetheless, prospects for an imminent rebound in upstream oil investment are currently unclear. "Currently, 2017 investment numbers are not even showing a rebound after 2016. We may well see a third year of investment decline if no new projects are undertaken," Birol said.
He added that oil remains the world's most strategic commodity.
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