Chevron’s Australian enterprise is least resilient amongst massive upstream gamers
Rystad Energy estimates that based on the gas reserves of its discovered fields in Australia, Chevron ranks first in terms of non-manufacturing assets and is one of the most important upstream companies in the country with a total of 21 trillion cubic feet (Tcf).
Operators with assets across Australia posted an estimated pre-tax impairment of USD 18 billion (A $ 23 billion) last year after the oil price crash, according to a report by Energieberatung.
Analyzing the break-even price of assets during the discovery phase is a key factor in understanding which companies are best positioned to continue investing in an upstream industry now defined by the volatility of oil prices, Rystad said.
For example: “Despite posting the largest impairment losses, Woodside Petroleum’s resilience stands out as the portfolio holds the underdeveloped reserves at break-even below $ 4 per thousand cubic feet (kcf),” added Rystad.
Rystad estimates that only 62% of Chevron’s Australian reserves (or 13 Tcf) have break-even gas prices below $ 4 / kcf, while much of the company’s gas resource base is considered costly.
Similarly, Rystad estimates that only 58% (about 9 Tcf) of total Australian Shell reserves of 16 Tcf offer a break-even price below USD 4 / kcf. For Santos, their estimates suggest that half of the company’s discovered reserves can be produced at break-evens below $ 4 / kcf, compared to 55% of Origin Energy’s discovered reserves and 74% of Beach. However, Rystad notes that the reserves for Origin and Beach are the smallest of the major Australian exploration and production players. The reserve-based outlier is Woodside, which at the discovery stage has 13 Tcf – or 85% of its Australian gas reserves – with a breakeven price below $ 4 / kcf.
With the increasing frequency of oil price drops, exploration and production companies with the most resilient portfolios are likely to prove more attractive to investors emerging from the Covid pandemic, Rystad said.
Woodside and Santos are likely to successfully build their reserves by the end of the decade and could be the largest contributor to new volumes from discovered assets by 2030, the consultancy added. However, the estimates suggest that only 65% of the assets discovered by Santos will break even below $ 4 / kcf.
