It's costing more to find a barrel.

(2023 Organic Finding & Development Costs)

Mar 12, 2024

∙ Paid
The Gist: (1) Organic Finding & Development for oil-focused
E&Ps rose to an 8-year high of $15/boe. Development costs are
the long-term driver of oil prices. Bullish oil long-term. (2) The
initial read on the supermajors is that Organic F&D is rising as
well with both XOM & CVX up significantly in the year. (3)
Upstream capex per boe, another metric for measuring the
capital intensity cycle, is rising as well.

So let's jump into, with a chart on organic finding and

development (F&D) costs for the oil-focused E&Ps.

The latest point is updated with 2023 10K’s showing F&D rose to
an 8-yr high of about $15 per boe or +50% y/y.
Said another way, the industry is investing $15 per barrel of oil
equivalent (oil, NGLs & natural Gas) to add to their reserves,
without factoring in any impacts from acquisitions or price
revisions.

The importance of tracking F&D costs, as discussed in last

week's post (HERE
(https://thecrudechronicles.substack.com/p/the-red-and-blue-
pills-in-energy)), lies in the fact that development expenses
influence oil prices in the long term. If the cost of producing an
additional barrel is increasing, that additional cost will eventually
reflect in the price, as illustrated below.

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