Re-Blogged from Forbes, By Christopher Helman
America’s oil producers are nervous. They’ve had a great run the past few years. Domestic oil production is up 43% since 2008 to 6.5 million barrels per day, the highest level in decades. The majority of that 2 million bpd jump comes out of the two most successful new oil fields, the Bakken and the Eagle Ford. To develop these and all the other fields nationwide, the top 50 operators invested $186 billion in 2012, according to Ernst & Young. That was a record level of spending, up 20% over 2011.
You’d think that with drillers getting better, honing techniques and driving down costs, that a 20% increase in investment would bring about a more than commensurate
increase in oil and gas production volumes, right? And yet according to Ernst & Young, total U.S. oil and gas production was up “just” 13% on the year.
It’s bad enough to be spending more and more to generate ever less growth. It’s worse when that growth doesn’t even translate into profits. Oil and gas companies have spent hundreds of billions acquiring acreage, drilling wells, booking reserves, boosting supplies, but in 2012 they proved too good at their job, found too much gas and