Bernstein’s energy analysts have looked at the upstream costs for the 50 biggest listed oil producers and found that — surprise, surprise — “the era of cheap oil is over”:
Tracking data from the 50 largest listed oil and gas producing companies globally (ex FSU) indicates that cash, production and unit costs in 2011 grew at a rate significantly faster than the 10 year average. Last year production costs increased 26% y-o-y, while the unit cost of production increased by 21% y-o-y to US$35.88/bbl. This is significantly higher than the longer term cost growth rates, highlighting continued cost pressures faced by the E&P industry as the incremental barrel continues to become more expensive to produce. The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. Assuming another double digit increase this year, marginal costs for the 50 largest oil and gas producers could reach close to US$100/bbl. Read more
The FT reports that US and Mexican oil companies are to be given rights to drill in a previously disputed area of the Gulf of Mexico under a landmark deal between the two governments that reflects their eagerness to develop domestic oil and gas production. An area of the gulf along the maritime boundary between the two countries, long left unexplored because of legal uncertainty about rights over its resources, will be made available to US oil groups and Pemex, the Mexican state oil company. The WSJ says that the dispute had lasted for over a decade. US and Mexican officials will work together to ensure safety standards are met. One of the potential drilling sites, close to the US maritime border, is under 9,000 feet of water – twice as deep as was drilled by the Deepwater Horizon rig that was involved in a massive oil spill in 2010.
Profits at Petrobras rose 32 per cent in the second quarter after a sharp appreciation of the local currency slashed the cost of the Brazilian state-controlled oil group’s dollar-denominated debt, reports the FT. The group reported net profit of R$10.9bn ($6.5bn) compared with R$8.3bn a year earlier, almost entirely because of currency and investment gains. Operating profit dipped 2.1 per cent after administrative and exploration costs wiped out the extra revenue from higher global oil prices. Meanwhile Bloomberg reports that Pemex credit default swaps are trading at the biggest differential to Petrobras CDS in a year, as the Mexican state-controlled oil producer is cutting international bond offerings while Petrobras ramps up its debt sales.