Highlights from the Energy Information Administration’s ‘Financial Review of the Global Oil and Natural Gas Industry: 2023’

 

     This report analyzes 175 upstream oil and gas companies and 42 downstream companies, or refiners. The companies in the study were mostly headquartered in the U.S. and Canada. The study utilized publicly available financial statements for the analysis. The key findings given are as follows:

• Brent crude oil daily prices averaged $82.18 per barrel in 2023—17% lower than in 2022.

 • Among the upstream companies, combined petroleum liquids production increased 4% in

2023 from 2022, and natural gas production decreased less than 1%.

 • Cash from operations decreased to $678 billion in 2023—21% lower in real terms than in

2022.

 • Exploration and development spending was 27% higher in real terms in 2023 from 2022.

 • The energy companies reduced net debt by $38 billion and allocated $89 billion to net share

repurchases in 2023.

 • Refiners’ earnings per barrel processed decreased on average in all regions in 2023.

 • Capacity utilization among refiners in Asia Pacific increased substantially in 2023.

 

Upstream Review

 

Several of the comparisons from 2022 to 2023 are a reflection of lower oil prices and especially lower natural gas prices. Companies seem to have done pretty well, especially with the cash generated from high commodities prices in 2022. E&P spending was up significantly in 2023. Going forward, this should keep oil production steady or moving upward. However, some of that spending is a reflection of higher reserve acquisition costs in 2023. As one graph indicates, these costs rose by 43% year over year while E&P spending increased only by 23%, so perhaps E&P activity is lower than it could be since the report notes that reserve acquisition costs made up a higher share of overall upstream costs. Finding and lifting costs also increased a bit. Natural gas production is dependent on prices, including regional prices where pipelines are constrained, as some regional players in Appalachia have shut-in production. The substantial increase in capacity utilization among refiners in Asia Pacific seems likely to be a reflection of Indian and Chinese refiners taking in more cheap Russian oil to refine. Yes, Modi, you too are helping to make Russian sanctions less effective.  

     I am not sure I fully understand the following graph, but the companies added a net of 2 billion barrels of oil equivalent (BOE) in oil and gas proved reserves for the year.

    

 

     The following graph is an interesting one. It shows that Canada had the biggest proved reserves increase of the year. It also shows proved reserves by region/country since 2014. It should be noted that this study may not be a true reflection of all companies combined but I am assuming the EIA considers it to be a reasonable approximation. This graph shows us where our oil and gas are coming from and where it will be coming from in the future. While many people still think oil is all coming from the Middle East, it really isn’t. The U.S. and Canada had combined proved reserves of about 120 billion BOE in 2023, while the Middle East had about 10 billion BOE.  

     Below is a graph of annual proved reserve additions since 2014. The ‘extensions and discoveries’ section shows that 2023 was a slightly lower-than-normal year for those exploration successes.

 

     Another of several interesting graphs from 2014 through 2023 shows cash from operations alongside capital expenditure. This shows that companies are still riding a cash-from-operations wave that began in 2021, although it dropped a bit in 2023 relative to high levels in 2022.  Another graph shows that 2021, 2022, and 2023 were the best years of the past decade for reducing debt by a pretty wide margin. The second graph depicting return on equity shows the same wave that began in 2021. These graphs suggest that most of these companies should be in decent financial health. This graph and the one below it also depicts comparisons of these energy companies to overall U.S. manufacturing. The long-term debt-to-equity ratio confirms that these upstream oil & gas companies with a ratio of about 41% are in better financial shape than all U.S. manufacturing combined which is at a ratio of about 52%.

 

 

Downstream Review

     The graph below shows that global refining capacity continues a very slight decreasing trend since it peaked in 2018-2019. We are now at a similar global refining capacity as in 2014.

     The global utilization of refining capacity increased, led by the Asia Pacific increase and by increases in Latin America. Utilization of refining capacity decreased a little in the U.S., Canada, and Europe.

 

References:

Financial Review of the Global Oil and Natural Gas Industry: 2023. Petroleum and Liquid Fuels Markets Team. Energy Information Administration. May 2024. 2023 Financial Review.pdf (eia.gov)