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Oil Companies’ Proved Reserves in 2016 Decline for Second Consecutive Year

Oil Companies’ Proved Reserves in 2016 Decline for Second Consecutive Year thumbnail
graph of global proved liquids reserves reported by 68 publicly traded companies, as explained in the article text

Source: U.S. Energy Information Administration, based on Evaluate Energy. Note: Rest of world includes associated companies’ reserves with unspecified geographies.

Annual reports of 67 publicly traded oil companies indicated that their aggregate proved liquids reserves declined in 2016 for the second consecutive year. The decline in proved reserves was heavily concentrated in a few companies that reduced their estimated reserves from Canadian oil sands projects. Downward revisions of existing resources, relatively low extensions and discoveries, and relatively high production also contributed to a decline in proved reserves.

graph of change in global proved liquids reported by 68 publicly traded companies, as explained in the article text

Source: U.S. Energy Information Administration, based on Evaluate Energy. Note: Rest of world includes associated companies’ reserves with unspecified geographies.

The 67 oil companies included in this analysis are listed on U.S. stock exchanges and consequently are required to report their proved reserves annually to the U.S. Securities and Exchange Commission (SEC). Collectively, their global crude oil and other liquids production averaged 24 million barrels per day (b/d) during 2016, or about 25% of the global total.

Proved reserves are the estimated quantities of oil that, with reasonable certainty, are recoverable under existing economic and operating conditions. These company estimates are based on available geologic and engineering data, which change as technology develops. Price changes and other economic factors can have a significant effect on the economic viability of oil projects, and some companies specifically cited low crude oil prices in 2016 as a reason to revise their proved reserves base downward.

Extensions (more resources at existing fields) and discoveries (resources at new fields) represent newly found quantities of oil and totaled 4.9 billion barrels across the 67 companies in 2016. Following the crude oil price decline beginning in mid-2014, companies significantly reduced capital expenditures, especially in their exploration and development budgets. Instead, they focused on extracting additional oil from reserves developed in previous years.

Additions from extensions and discoveries and net purchases of reserves from companies not included in this analysis were offset by large negative revisions to company assessments of existing reserves. Reserves also declined as these companies collectively extracted 8.7 billion barrels of liquids in 2016. The combined effect of these changes and other factors was a net reduction of 5.4 billion barrels in proved reserves.

graph of change in global proved liquids reported by 68 publicly traded companies, as explained in the article text

Source: U.S. Energy Information Administration, based on Evaluate Energy

Later this year, EIA will issue an annual report that focuses exclusively on proved reserves located in the United States, including all U.S. producers, whether or not they are publicly traded. The relatively small change in the U.S. reserves component of global total reserves for the 67 companies whose reports were reviewed here suggests that EIA’s 2016 proved reserves report for the United States will show only modest changes from the 2015 report.

So far in 2017, capital expenditures remain lower than for the same period in 2016. Generally, larger companies with more production are reducing expenditures, while relatively smaller companies are increasing their capital expenditures.

graph of change in capital expenditures reported by 67 publicly traded companies, as explained in the article text

Source: U.S. Energy Information Administration, based on Evaluate Energy. Note: Two companies merged in the first quarter of 2017, reducing the total number of companies in this analysis.

Forty-five of the companies in this analysis produced less than 250,000 b/d in the first quarter of 2017, and 28 of those 45 increased their capital expenditures compared with the first quarter of 2016. In aggregate, those 45 companies increased their capital expenditures by $2.6 billion. In contrast, 16 of the 21 companies producing more than 250,000 b/d in this analysis reduced capital expenditures. Those 21 companies, in aggregate, lowered their capital expenditures by $10.6 billion.

Republished on EIA website, June 13, 2017, 4:30 p.m. to correct for double counting in company level reporting.

EIA



9 Comments on "Oil Companies’ Proved Reserves in 2016 Decline for Second Consecutive Year"

  1. twocats on Fri, 23rd Jun 2017 12:46 pm 

    those that are trying to make a quick buck are increasing exploration, looking at a five year frame. Those looking longer can already see the end game and aren’t really bothering except to keep up appearances. the small companies remind me of house-flippers. Drill or Drop. Oiler vs Oiler (brother vs brother). doesn’t make for very good television i’m sure, but as a business model – hype hype hype it up!!

  2. rockman on Fri, 23rd Jun 2017 2:37 pm 

    How companies “lose” reserves even if the bbls don’t disappear:

    “The SEC price deck, against which companies compare their well economics to book their reserves, is set by an average price of the first day of every month of the year. The SEC price deck set at year-end 2014 for 2015 was $94.99 per barrel for crude oil.”

    The average end of month price deck used by the SEC for 2015 to be used for 2016 reserve calculation was $50.28/bbl.

    The average end of month price deck used by the SEC for 2016 to be used for 2017 reserve calculation was $42.75/bbl.

    Which isn’t to say companies found more reserves in a given year then what the produced. But it should be obvious that much of the reserve reduction is a result of lower SEC pricing requirements causing formerly commercial proven reserves to lose that classification.

    If/when prices increase many of those “lost” bbls will be added back onto the books.

  3. Hubert on Fri, 23rd Jun 2017 3:21 pm 

    We are on the downside of the Hubbert’s curve. It’s really all downhill from now on.

  4. Apneaman on Fri, 23rd Jun 2017 10:43 pm 

    I can smell the fear, panic and desperation of the Cancer Empire.

    EPA head defends White House’s plan for massive cuts to his agency

    http://www.desdemonadespair.net/2017/06/epa-head-defends-white-houses-plan-for.html

    Trump is handing the U.S. government over to fossil fuel interests – The appointments, the policies, the rhetoric — it is not subtle

    http://www.desdemonadespair.net/2017/06/trump-is-handing-us-government-over-to.html

    If not trump then whatever other puppet was in place. This type of desperation is happening in other countries and will continue as the Cancer looks for any and all remaining healthy tissue to consume.

    The first few days of summer was a brutal heatwave across large swaths of the northern hemisphere – can’t wait for July & August. Soon all the environmentalists will be screaming for TPTB to fire the power-boilers with the national forests and vinyl siding if that’s what it takes to keep the A/C running.

  5. makati1 on Fri, 23rd Jun 2017 11:01 pm 

    Addiction is a terrible thing … only exceeded by the pains of withdrawal.

  6. Lt. Jack Woo on Sat, 24th Jun 2017 11:52 am 

    rockman, you nailed it. Wonder if there’s a way to look back and track proven reserves YoY change at a fixed price deck. For example what were the proven reserves for 2012, 13, 14, 15, 16 at $45 price deck? That’s something I’ve suggested analysts smarter than me look at.

  7. rockman on Sat, 24th Jun 2017 12:29 pm 

    LT – “That’s something I’ve suggested analysts smarter than me look at.” Smarts won’t do the job. Use ExxonMobil as an example. A third party company looks at every reservoir and calculates if the reserves rate a proven category rating. That would be based upon calculating the net revenue based on the SEC price deck and the estimated cost to develop those reserves. If the net is positive then those reserves are booked as proved. Typically while we don’t have the consultants calculate proved reserves at different prices we commonly do run different pricing scenarios internally. And we never release those numbers publicly for a variety of reasons. Not the least of which it would violate SEC regs.

    The govt is very serious about statements public companies put out about their value. Which is why you see companies trying to promote themselves using phrase as “containing X million bbls of resources” or a reservoir “holding X million of bbls of oil”. While these can be potentially deceptive they are legal. They can’t say they have an audited proven reserve valued at any price other the what the auditors use…the SEC authorized price deck.

  8. Apneaman on Sat, 24th Jun 2017 1:35 pm 

    Demand to ship gasoline on top U.S. pipeline at six-year low

    “The operator of the biggest U.S. fuel pipeline system said on Thursday demand to transport gasoline to the country’s populous northeast is the weakest in six years, the latest symptom of a global oil market grappling with oversupply.

    Summer is typically when gasoline demand peaks in the world’s biggest oil consuming country as motorists hit the road for vacation, and keeping their gas tanks full strains the capacity of U.S. refiners and pipelines.

    This year, so much fuel is stored in tanks in the Northeast that Colonial Pipeline Co [COLPI.UL] said in a notice to customers that demand from refiners and fuel traders to bring gasoline through its pipeline to the region from refining hubs in the South was the worst in six years.”

    http://www.reuters.com/article/us-usa-gasoline-colonial-idUSKBN19D270

  9. shortonoil on Sat, 24th Jun 2017 5:38 pm 

    What was the price at which that those reserves were calculated? It is kind of a worthless estimate without that data point.

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