investment in natural gas loses its shine

Wednesday, May 21, 2014

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This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

Total upstream capital spending continued to rise in 2013, but while investment in oil-related projects is up, capital spending in upstream natural gas is falling. What's more, the overall rate of increase in upstream capital spending is losing momentum, prompting the question of whether we are seeing the early signs of a cyclical downturn in capital spending following a decade of strong growth. That's according to an Evaluate Energy analysis of the latest company capital expenditure data for 2013. This analysis adds more granularity to the EIA's analysis of upstream capital spending that used Evaluate Energy's data last month.

Companies do not generally report the split between capital expenditure (capex) on oil vs gas related projects. So we have created a couple of peer groups for this analysis: one oil-weighted group of 85 companies (see note 1) whose oil production forms more than 75% of their total oil and gas output and another gas-weighted group of 29 companies (see note 2) whose natural gas production forms more than 75% of their output.

For the purposes of this report, we have studied the capex of the oil-weighted group since 2007. These companies accounted for US$250 billion of capex in 2013 and their total capex has been rising in absolute terms in recent years. However, the rate of growth in oil capex has been slowing, a trend that looks like it will continue as margins continue to be squeezed.

 

Source: Evaluate Energy

For the gas-weighted group, we can see that both the rate of growth and the absolute level of capex has been falling. As many of the companies in this group are based in the United States, this trend partly reflects the downturn in gas-focused capital projects as gas prices remain low.

 Source: Evaluate Energy

This report was created using the Evaluate Energy database, which provides clients with efficient data solutions for oil and gas company analysis. Our database holds over 20 years of financial and operating data for the world's biggest oil and gas companies. Evaluate Energy also has extensive M&A, Assets, Refinery and LNG databases.

Notes

1) Oil weighted group includes: Berry Petroleum Co., Clayton Williams Energy, PDVSA, Madalena Energy Inc., Sinopec, EPL Oil & Gas Inc, CNOOC Ltd, Pemex, Lundin Petroleum, Petrobras (IFRS US$), Resolute Energy Corporation, Lukoil (US GAAP), Nexen Inc., KazMunayGas, Ecopetrol, Gazprom Neft, Whiting Petroleum Corporation, Surgutneftegaz (IFRS), Oil Search, Imperial Oil Limited, Baytex Energy Corp., TNK-BP International Ltd, Diamondback Energy Inc., Pacific Rubiales Energy Corp., Kodiak Oil & Gas Corp., Coastal Energy Company, Rosneft, Kuwait Petroleum Corporation, Suncor Energy Inc., Oasis Petroleum Inc., Oil India, Northern Oil & Gas, Inc, Gulfport Energy Corporation, Circle Oil, Denbury Resources Inc., Grupa Lotos, Vaalco Energy Inc, Afren, Gran Tierra Energy Inc., Sherritt International Corp, Tatneft, Europa Oil and Gas, Kinder Morgan Energy Partners, L.P., Pan Pacific Petroleum, Petro Vista Energy Corp., Baron Oil PLC, Hardy Oil, Egdon Resources, CAMAC Energy Inc, Sterling Energy, Global Energy Development, Oilex, Carnarvon Petroleum Ltd, Suroco Energy Inc., Maple Energy, Cooper Energy Limited, Amerisur Resources, PA Resources AB, PetroLatina Energy, TransGlobe Energy Corporation, Max Petroleum Plc, Providence Resources PLC, ROC Oil, Heritage Oil Plc., Horizon Oil, BPZ Resources Inc, DNO International ASA, Ithaca Energy Inc., Canacol Energy Ltd., Gulf Keystone, Nostrum Oil & Gas LP, Bankers Petroleum Ltd, Cosmo Oil, Parex Resources Inc., Dragon Oil, Kosmos Energy, Maurel & Prom SA, Petrominerales Ltd., KazMunaiGas Exploration Production, Bashneft, Galp Energia, SK Innovation Co. Ltd, EnQuest PLC, GAIL, Maersk Group.

2) Gas weighted group includes: Southwestern Energy Co., CPC Corporation, Ultra Petroleum Corporation, Northern Petroleum, EXCO Resources, Niko Resources Ltd., Nexus Energy, Cabot Oil & Gas Corp., Encana Corporation, Questar, EQT Corp, Novatek, Gazprom, Polish Oil & Gas, Bill Barrett Corporation, Comstock Resources, Paramount Resources Ltd., PetroQuest Energy, Inc, Regal Petroleum, Quicksilver Resources Inc, WPX Energy, Chesapeake Energy Corp., National Fuel Gas, Goodrich Petroleum Corp, Range Resources Corp, JKX Oil & Gas, QEP Resources Inc, KUFPEC, Santos

 

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