US oil and gas reserve rates soar as costs fall on new technologies

New technologies are having a dramatic impact on a couple of key measures for US E&P efficiency according to a recent report by Oppenheimer’s Fadel Gheit, who finds reserve replacement rates rising as finding costs are falling.

His study analyzes the reserve profiles for a group of 14 key E&Ps through 2010, noting that their combined reserve replacement rate averaged 413% last year, up from 311% in 2009, while their finding and development costs fell 4% to a natural gas-equivalent average of $2.01/Mcf from a level of $2.10 in 2009.

“Improved driling and completion methods in unconventional gas plays in onshore North America boosted reserve replacement rates and reduced F&D costs for the group and the majority of E&P companies this year,” Gheit summarized in his report on the study.

Range Resources emerged as prime beneficiary of the new technologies and its position in Pennsylvania’s Marcellus Shale, posting the highest reserve replacement ratio of 932% and the lowest cost with 72 cents/Mcfe.

The group produced a record oil-equivalent total of 1.6 billion barrels in 2010, led by Occidental Petroleum with 273 million boe and Apache with 240 million boe. At the same time, the group doubled 2009 spending to $67 billion on increased drilling and acquisitions, led by Apache with $17.2 billion.

Gheit’s study found that this group added 10.6 billion boe of reserves during the last three years and 16.6 billion boe in the last five, including respective oil additions of 3.5 billion and 5.5 billion barrels.

Platts