2023 Company-Level Oil Production On Federal Leases

Highlights:

• The Department of Interior (DOI) released its calendar year 2023 Federal revenue by company dataset this week

• This dataset includes revenues for U.S. Federal lands and offshore areas. It does not include Native American lands, privately owned lands, or U.S. state lands.

• The datasets currently include data tracked and managed by:

  • Department of the Interior’s (DOI) Office of Natural Resources Revenue (ONRR)

  • Bureau of Land Management (BLM)

  • Office of Surface Mining, Reclamation, and Enforcement (OSMRE)

• EnerWrap analyzed and wrangled the data and made a number of assumptions to convert royalties paid to the U.S. Government into company-level oil revenue and barrels produced in 2023 on federal leases

• We then compared 2023 data versus 2022 to analyze company-level oil production growth rates on federal leases

• The analysis was done only on oil royalties, we will likely do the same analysis on natural gas in the coming days

A number of assumptions needed to be made to convert company-level royalty payments into company-level revenue and production on Federal leases:

• The DOI provides aggregate royalties and oil production for each calendar year

• Using the onshore/offshore split and making an assumption on deepwater/shelf split for offshore a total blended royalty rate was calculated at 15.7% for 2023

• Using the blended royalty rate and aggregate royalties paid, total company-level revenue net of allowable costs was calculated at $74.2 billion in 2023, down from $78.9 billion in 2022

  • Implied net price per barrel subject to royalties was calculated at $57.95 for 2023, down from $68.30 in 2022

  • Average WTI oil prices were $77.58 in 2023 and $94.90 in 2022, representing 74.7% and 72.0% ‘basis’ to WTI, respectively

  • We believe the ‘basis’ is attributable allowable cost deductions, such as transportation costs

• Royalty rates used were 12.5% for onshore oil production, 12.5% for offshore continental shelf production and 18.75% for offshore deepwater production

  • Section 50261 of the IRA amends section 8(a)(1) of the Outer Continental Shelf Lands Act, 43 U.S.C. § 1337(a)(1), to increase the minimum royalty rate for oil and gas production on the Outer Continental Shelf from 12.5% to 16.66%. The section also caps the maximum royalty that can be charged for oil and gas production on the Outer Continental Shelf for the next ten years at 18.75%. Once the cap expires (i.e., ten years after enactment of the IRA), only the statutory minimum will apply

  • We assumed no oil production from 2023 OCS lease sales, therefore all OCS oil production was assumed to still be subject to 12.5% royalty rates

  • The analysis will get trickier in future years with both onshore and OCS royalty rates increasing

  • Based on historical data, it was assumed 90% of offshore oil production was deepwater

• Each company was assigned as onshore, offshore or a mix of onshore, with the mix category using an average of onshore and deepwater royalty rates

• Using the assigned royalty rates and royalties paid, company-level revenue from Federal leases was calculated (royalties paid divided by royalty rate)

• Using the implied net price per barrel subject to royalties of $57.95, each category was assigned an assumed net oil price per barrel

  • Onshore was +$10, or $67.95 per barrels

  • Offshore was -$5, or $52.95 per barrel

  • Mix was flat to $57.95 per barrel

  • We assume offshore allowable costs such as transport costs are higher than onshore production from Federal leases

• Utilizing the company-level revenue and assigned/assumed net oil price, oil production was calculated

• The same analysis was done for 2022

• We acknowledge a number of assumptions are being made, and further that the dataset is not granular enough to understand the pace of company-level oil production; for example:

  • Our basis assumptions may be incorrect

  • We are unable to weight oil prices at the company-level based on the trajectory of production throughout 2023

  • Companies that fall below a $100,000 royalty payment threshold are aggregated, but also make up less than one quarter of one percent of total payments

  • All that being said, our company-level oil production using the analysis described ties back to within 0.8% of the aggregate reported oil production

Top-50 2023 Oil Producers on Federal Leases

Using the methodology described above, the top-50 oil producers on federal leases in 2023 are shown below, together with 2022 oil production and the increase or decrease compared to last year. Companies with no change were not identified in the 2022 dataset.

The top-20 2023 producers represent 76% of all oil production on federal leases and the top-50 represent 92% of 2023 production. Both the top-20 and top-50 percentages are up slightly versus 2022.

Consolidation may come into play for some of the year-over-year changes. We made no attempt to reconcile consolidation. Ridgewood Energy had one line item in the 2022 dataset versus three in 2023, which was unreconcilable.

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