Two years of low spending has little impact on reserves

Low capital spending throughout the pandemic did not stop North American producers from maintaining their oil and gas reserve positions.

This is according to a new report from Evaluate Energy that goes further than its usual cash flow analysis to provide details on proved reserve replacement activity since the start of 2018 for 75 producers across the U.S. and Canada.

The report is available to download here

Evaluate Energy’s reserves analysis is divided into four peer groups, with U.S. and Canadian producers separated into oil and gas producers based on oil-weighting of latest production. Oilsands producers were excluded. Reserves replacement ratios were calculated by dividing reserve additions via extensions, discoveries and improved recovery by total production over the same time period.

“Up to Q4, when capital spending began to increase across the industry, we’ve seen a near two-year period where spending was restrained,” said Mark Young, senior analyst at Evaluate Energy and report author. “Despite this, while replacement ratios fell across the board in 2019 and 2020, it was only the group of Canadian oil producers that recorded anything less than 100 per cent for any individual year. They then rebounded a year later with a 150 per cent ratio, effectively wiping out any potential negative impact of a ‘down’ 2020.”

The report focuses on cash usage across the industry, so it excludes any impact of rising commodity prices. The data refers only to reserves replacement through exploration and development efforts. Young stresses that high oil and gas prices will have also played a major role in 2021 to increase reserves in conjunction with activity covered within the report.

The report also includes details on all the main Q4 cash flow trends seen in Canada and the U.S. relating to capex, debt repayments and shareholder returns via dividends and buybacks. It is available for download here.

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