Oil and gas companies increased reserves, revenue in 2010

Despite fallout from the Gulf of Mexico oil spill, the 50 largest public oil and gas companies operating in the U.S. posted a stellar comeback year in 2010, experiencing major growth in reserves, revenue and acquisitions over a lackluster 2009, according to a report released this week by Ernst & Young.

The 50 companies saw their largest annual increase in domestic oil and gas reserves in at least five years, the consulting firm said in its annual U.S. E&P benchmark study.

End-of-year oil reserves totaled 17.8 billion barrels in 2010, an 11 percent increase over 2009. Natural gas reserves totaled 174.3 trillion cubic feet, growing by 12 percent.

The growth came in the wake of turbulent years for the industry, marked by volatile oil prices, regulatory uncertainty and the disastrous BP oil spill in April 2010. But a combination of technological advances, new discoveries and big acquisitions kept the industry out of a potential slump.

“The industry is incredibly resilient,” said Marcela Donadio, leader of the Americas oil and gas sector for Ernst & Young. “In spite of some fairly significant challenges in 2010, you see an industry focused very, very definitively on reinvesting in finding additional sources of supply.”

The consulting firm analyzed annual reports filed by the nation’s largest energy exploration and production companies, based on 2010 end-of-year reserves estimates, focusing on their domestic upstream activity between 2006 and 2010. The results include performance by XTO Energy, which  Exxon Mobil acquired in early 2010.

Spending on deals to acquire proved and unproved reserves boomed in 2010, growing to $101.5 billion from just $13.5 billion in 2009. Meanwhile, per barrel upstream revenue grew 18 percent, to $43.82 in 2010 from $37.09 in 2009.

The industry benefited from a number of factors in 2010, including higher oil prices, the shale boom and growing energy demand from a recovering economy, Donadio said.

In particular, the Permian Basin in West Texas and the Eagle Ford play in South Texas are benefiting from growing interest in producing oil locked in shale formations, the firm noted, spurred by the rising cost of crude while natural gas prices stay low.

“This year, it was all about Permian and Eagle Ford on the oil side. There was really a focus in the industry to move towards the oil drilling,” said John Russell, Ernst & Young oil and gas assurance partner.