E&P Stock Perspectives Per Underlying Commodity Price Drivers
18 April 2013 ¦ 13 pages ir.citi.com
E&P’s U.S. Proven Natural Gas Reserves Declined In 2012 Due
Predominantly To Sharp Negative Price-Related Revisions
2012 E&P U.S. Proven Natural Gas Reserves – Based on our study group of 48
E&P companies, which account for ~45% of total U.S. natural gas production, U.S.
proven natural gas reserves declined nearly 16% at year-end 2012 predominantly
as the result of significant negative revisions due to the sharp drop in natural gas
prices last year. The SEC-required natural gas price for reserve bookings was
$2.76/MMBtu in 2012, or a sharp drop from $4.12/MMBtu in 2011. Within our E&P
coverage group, CHK, EOG, DVN, SWN and UPL posted the largest negative
domestic natural gas revisions while RRC and APC both posted positive natural gas
reserve revisions due to strong well performance and the effects of new infill drilling
programs in core resource plays. Excluding revisions, 2012 drill-bit natural gas
reserve replacement was ~182% which is below the figures posted in each of the
prior five years. Within our E&P coverage group, ROSE, COG, NBL and MRO
posted the greatest drill-bit reserve replacement in 2012. Interestingly, U.S. natural
gas proven reserve divestitures exceeded acquisitions by ~2.5 Tcf last year for this
study group. Also, amidst persistently weak domestic natural gas prices, many
producers shifted planned capital outlays away from natural gas to oil and liquids
development projects over the next five years which partly drove the drop in the
PUD mix for proven natural gas reserves to 35% last year from 40% in 2011. |
