EY Study Reveals Robust Performance, Sustainable Practices, and ESG Advancements in the US Oil and Gas Sector
Amid the global shift towards decarbonization and heightened environmental awareness, the US oil and gas industry has emerged as a crucial and resilient energy asset. An EY study on US oil and gas reserves, production, and ESG practices demonstrates how the sector’s largest publicly traded companies have not only improved shareholder returns but also adapted to meet evolving challenges. The study showcases the remarkable growth in the industry, emphasizing that it remains an integral part of the energy transition.
In 2022, the companies studied achieved pre-tax earnings of $32.21 per barrel of oil equivalent (BOE), a significant increase from the $10.00 per BOE recorded in 2014 during the shale boom. This impressive rise in earnings is a testament to these companies’ ability to control costs effectively, even in the face of higher inflation rates. Notably, production costs decreased from $14.09 per BOE in 2014 to $12.56 per BOE in 2022, thanks to technological advancements and operational efficiencies.
The study also highlights the industry’s shift towards more disciplined drilling plans, focusing on discovered and developed plays rather than new ones. Exploration expenses saw a substantial decline from $9.1 billion in 2014 to $2.3 billion in 2022. Despite this reduction, exploration and extension drilling contributed 3.9 billion barrels to oil reserves and 21.9 billion cubic feet of gas reserves, surpassing the 3.2 billion barrels and 15.9 billion cubic feet produced. This demonstrates the industry’s capacity for organic growth and its ability to maintain high levels of production in the medium term.
Herb Listen, EY Americas Energy and Resources Assurance Leader, commends the sector for delivering strong shareholder returns and organic reserves growth, illustrating a newfound resilience honed from past boom-bust cycles.
In 2022, the studied companies collectively generated $333.0 billion in revenues, surpassing the previous record set in 2014. The analysis also indicates a reduction in impairments to $1.0 billion, the lowest in five years, and a significant increase in dividends and share repurchases, rising 210% from $19.0 billion in 2021 to $58.8 billion in 2022.
The energy crisis of 2022 prompted a realization of the long-term importance of oil and gas in the global energy landscape. Industry leaders are now focused on managing oil and gas production through the energy transition, decarbonizing, and enhancing operational efficiencies. They are also innovating with newer technologies such as carbon capture, differentiated gas, and hydrogen, demonstrating a commitment to sustainability and adaptability.
Moreover, the report highlights the continued improvement in Environmental, Social, and Governance (ESG) reporting among the companies studied. ESG reporting is evolving and expanding, driven by the need to secure the social license to operate and meet sustainability goals. In 2022, 88% of the companies published sustainability or ESG reports, a 6% increase from the previous year. All integrated companies and 95% of large independents released such reports. Furthermore, 90% of the companies disclosed at least one scope of emissions, with fifteen companies providing detailed information on Scopes 1 and 2 emissions, as well as at least one category of Scope 3 emissions.
In summary, the US oil and gas industry’s remarkable performance and commitment to ESG practices have positioned it as a resilient and sustainable energy asset in an ever-changing world. As the energy transition unfolds, the industry is primed to navigate the challenges and opportunities that lie ahead, reinforcing its role as a key player in the global energy landscape.