Oil and gas finding costs are on the rise again as inflationary pressures return to the industry and as Major companies struggle to improve their exploration performance in terms of reserves found per well drilled. That’s the picture that emerges from the latest company data from Evaluate Energy. In this report we focus just on the leading Major companies – BP, Chevron, Conoco, ExxonMobil, Petrobras, Shell and Total. We’re defining finding costs as exploration costs (as reported by the companies in their FAS69 submissions to the US SEC) divided by extensions and discoveries and revisions to Proved Reserves. Revisions often result from changes to reserves that may have been booked in the past but as they reflect better knowledge of reserve size and reservoir conditions, it makes sense to include them in this calculation.   Latest Trends for 2011
Evaluate data shows finding costs rising again in 2011 and sharply higher than a decade ago.

It would appear that the continued upward trend has been due both to rising operating costs (Evaluate data shows the average cost of producing a barrel of oil equivalent)   as shown in the graph below….

…..and to a rather lacklustre performance in terms of reserves added via exploration drilling:  the graph below shows the trend in reserves added via exploration and indicates that companies performed no better in 2011 on this measure than in 2010.

Ranking the Companies
There are significant fluctuations in company costs and reserve additions from year to year so we have taken a 10 year average to try to smooth out the data.

The graph shows Total delivering the lowest 10 year average finding costs of any of the Majors, followed closely by ExxonMobil and Petrobras. BP turns in the highest cost in the group at just under $5/bbl oil equivalent. This is partly because BP had some pretty big negative revisions to reserves in the last 2 years that caused its ranking to hit rock bottom.  If you ignore revisions and just look at the cost or finding proved reserves via discoveries alone, then BP actually comes out on top with the lowest 10 year…

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