U.S.-based integrated energy firms will post reasonable reserve-replacement volumes for 2004, say Petrie Parkman & Co. analysts Steve Enger and Chi Chow. They expect about 110% of production will be replaced at a finding and development (F&D) cost of about $8.70 per barrel of oil equivalent (BOE), excluding sales and purchases. The performance of individual companies will vary widely, of course. Murphy Oil should lead the pack, buoyed by bookings from its Kikeh discovery offshore Malaysia. Marathon Oil and ConocoPhillips will also more than replace 2004 production, and both are projected to post F&D costs of less than $7 per BOE. Oxy and Unocal should also have reserve additions that meet or exceed their 2004 production, with F&D costs of $8 and $13 per BOE, respectively. Although commodity prices have been quite strong, some firms are struggling to replace 2004 production. Amerada Hess and Kerr-McGee appear unlikely to add sufficient reserves to offset their 2004 production, the analysts report, and the two firms could have F&D costs in the $14-per-BOE range. "The 2004 reserve replacement looks to be generally in-line with that of the past few years, as the group struggles to post what we would consider impressive results on that measure even with the tail wind of very strong oil and gas prices," say Enger and Chow. During a three-year span, the U.S.-based diversified firms with the best reserve-replacement records have been Oxy, Marathon and Unocal. The three companies replaced about 110% of their production during 2002-04 at F&D costs ranging from $5.90 to $9.80 per BOE. Looking forward, the companies in the group with the best outlook for reserve additions are Murphy, Unocal and Amerada Hess. Murphy will benefit from its multiple discoveries offshore Peninsular Malaysia and Sarawak, as well as its Kakap and Senangin developments and additional plays at Kikeh. Unocal has several Asian gas projects in the works, and a series of deepwater Gulf of Mexico fields in development. Amerada Hess has projects in Asia and the Gulf of Mexico, and hopes to shortly enter into an agreement to work in Libya. -Peggy Williams

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