Fitch: North American Energy E&P Costs Did Not Pressure Oil Prices Meaningfully in 2013
31 July 2014 - 6:47AM
Business Wire
Link to Fitch Ratings' Report: Full Cycle Costs for North
America E&P (Production Costs Moderate in
2013)http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753198
North American exploration and production (E&P) costs did
not meaningfully pressure global oil prices in 2013, according to a
Fitch Ratings study.
Fitch based its conclusions on a sample of 31 companies'
full-cycle costs. The study found that the full-cycle revenues
required by the median North American E&P company rose just 1%
year over year (1.4% annually since 2008). When taking into account
changes in mix, full-cycle oil and gas prices declined about 1.1%
and 1.4% on a one-year and five-year basis, respectively.
The biggest source of cost pressure for North American producers
remains high finding, development and acquisition (FD&A) costs,
followed by higher production costs. Fitch notes that efficiency
gains in shale plays have helped keep overall cost increases in
check.
Full-cycle costs for North American E&P companies have
demonstrated a trend of cost moderation over the last few years.
This suggests that much of the run-up in global oil prices can be
attributed to non-fundamental factors - geopolitics, monetary
policy, etc. - rather than rising unit costs. Shale has been a key
factor in stabilizing U.S. costs, given the ongoing trend of
efficiency gains in shale plays, as well as increased allocation of
capex budgets to shale among independent E&Ps.
Fitch notes also that North American cost trends may not be
fully representative of cost trends seen globally, given that shale
development has not spread as rapidly outside North America.
However, favorable cost trends in North America matched with
rapidly growing production have had a moderating effect on world
oil prices. Fitch expects this will continue to be the case given
expected rapid growth of shale production.
The full report 'Full Cycle Costs for North American E&P' is
available at 'www.fitchratings.com' or by clicking on the link.
Additional information is available at
'www.fitchratings.com'.
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Fitch RatingsMark C. Sadeghian, CFASenior Director+1
312-368-2090Fitch Ratings, Inc.70 W MadisonChicago, IL 60602orMedia
Relations, New YorkBrian Bertsch, +1
212-908-0549brian.bertsch@fitchratings.com