By Anna Driver
HOUSTON, Feb 17 (Reuters) - U.S. oil and gas companies Devon Energy and Chesapeake Energy posted large gains in their reserves for 2009 as they tapped into vast natural gas fields in North America and took advantage of new rules that relaxed methods for measuring energy resources.
Those increases came despite a reduction in overall industry spending to drill new wells and after natural gas in storage tanks swelled to record levels in November.
XTO Energy Inc, which has agreed to be acquired by Exxon Mobil Corp, Newfield Exploration Co and Marathon Oil Corp also reported big reserve gains.
The jump in reserves can partly be attributed to increased exploration of North America's vast shale gas fields which have high-performing wells and changes in reserve reporting rules from the U.S. Securities and Exchange Commission.
'First of all, a lot of companies have drilled quite a few wells in places like the Haynesville,' Mike Breard, energy analyst with Hodges Capital Management in Dallas, said. 'There, if you drill a successful well, you know everything around it is going to be good.'
The new rules from the SEC -- the first changes in 30 years -- also provided companies with more flexibility in allowing reserves to be reported. To be classified as proved reserves, companies must list reservoirs that can be produced using currently available technology at recent energy prices.
New definitions of those rules, Breard said, allow companies to add more undrilled locations to their reserves.
Chesapeake, which holds the right to drill on nearly 3 million acres in natural gas formations including Pennsylvania's Marcellus and Louisiana's Haynesville shales, said on Tuesday that its proved reserves grew 18 percent and reported it replaced 343 percent of the gas it produced. .
That replacement rate is used by industry analysts to judge production companies' potential growth. A replacement rate below 100 percent indicates a company is shrinking by finding fewer new fields to offset oil or gas it is pumping out of the ground.
Chesapeake's reserve growth was fueled by a 70 percent jump in additions from the company's shale plays, according to energy research firm Tudor, Pickering, Holt & Co in Houston.
Devon, which is in the middle of divesting its offshore and international assets, said on Wednesday that its North American onshore proved reserves rose 20 percent to a record 2.641 billion oil-equivalent barrels (BOE) last year.
Some of those reserve additions from Devon were those that had been taken off the books in 2008 because of low prices, Breard said, but were added back this year.
When estimating reserves under the SEC rules, companies use an average price. If it is not economic to produce the reserves at that price, the reserves cannot be added to a company's reserve total. This leads to fluctuations in reserves as prices go up and down.
XTO said its 2009 proved oil and gas reserves rose 7 percent, while Newfield's reserves climbed 23 percent.
Marathon's reserves rose 40 percent to 1.679 billion barrels as the new rules allowed it to book resources at its Athabasca Oil Sands project.
(Reporting by Anna Driver in Houston; Editing by Tim Dobbyn) Keywords: ENERGY RESERVES/ (anna.driver@thomsonreuters.com; 1 713 210 8509; Reuters Messaging: anna.driver.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
HOUSTON, Feb 17 (Reuters) - U.S. oil and gas companies Devon Energy and Chesapeake Energy posted large gains in their reserves for 2009 as they tapped into vast natural gas fields in North America and took advantage of new rules that relaxed methods for measuring energy resources.
Those increases came despite a reduction in overall industry spending to drill new wells and after natural gas in storage tanks swelled to record levels in November.
XTO Energy Inc, which has agreed to be acquired by Exxon Mobil Corp, Newfield Exploration Co and Marathon Oil Corp also reported big reserve gains.
The jump in reserves can partly be attributed to increased exploration of North America's vast shale gas fields which have high-performing wells and changes in reserve reporting rules from the U.S. Securities and Exchange Commission.
'First of all, a lot of companies have drilled quite a few wells in places like the Haynesville,' Mike Breard, energy analyst with Hodges Capital Management in Dallas, said. 'There, if you drill a successful well, you know everything around it is going to be good.'
The new rules from the SEC -- the first changes in 30 years -- also provided companies with more flexibility in allowing reserves to be reported. To be classified as proved reserves, companies must list reservoirs that can be produced using currently available technology at recent energy prices.
New definitions of those rules, Breard said, allow companies to add more undrilled locations to their reserves.
Chesapeake, which holds the right to drill on nearly 3 million acres in natural gas formations including Pennsylvania's Marcellus and Louisiana's Haynesville shales, said on Tuesday that its proved reserves grew 18 percent and reported it replaced 343 percent of the gas it produced. .
That replacement rate is used by industry analysts to judge production companies' potential growth. A replacement rate below 100 percent indicates a company is shrinking by finding fewer new fields to offset oil or gas it is pumping out of the ground.
Chesapeake's reserve growth was fueled by a 70 percent jump in additions from the company's shale plays, according to energy research firm Tudor, Pickering, Holt & Co in Houston.
Devon, which is in the middle of divesting its offshore and international assets, said on Wednesday that its North American onshore proved reserves rose 20 percent to a record 2.641 billion oil-equivalent barrels (BOE) last year.
Some of those reserve additions from Devon were those that had been taken off the books in 2008 because of low prices, Breard said, but were added back this year.
When estimating reserves under the SEC rules, companies use an average price. If it is not economic to produce the reserves at that price, the reserves cannot be added to a company's reserve total. This leads to fluctuations in reserves as prices go up and down.
XTO said its 2009 proved oil and gas reserves rose 7 percent, while Newfield's reserves climbed 23 percent.
Marathon's reserves rose 40 percent to 1.679 billion barrels as the new rules allowed it to book resources at its Athabasca Oil Sands project.
(Reporting by Anna Driver in Houston; Editing by Tim Dobbyn) Keywords: ENERGY RESERVES/ (anna.driver@thomsonreuters.com; 1 713 210 8509; Reuters Messaging: anna.driver.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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