Strong commodity prices and higher revenues led upstream companies to double their capital spending last year in North America. But outside of the U.S. and Canada, expenditures fell 14%, according to the 2001 edition of Andersen's "Global E&P Trends" analysis. The 22-year-old survey, which looked this year at the 2000 activities of 155 publicly traded companies from 1996 to 2000, found that the group posted a combined record after-tax profit from upstream activities of $89 billion, a 125% increase from 1999. Revenues rose 63% to $271 billion. In the U.S., revenues from upstream activities increased 81% to $78.0 billion, reflecting a 72% rise in average wellhead prices for oil (to $26.73 a barrel) and a 66% increase in average wellhead prices for gas (to $3.60 per thousand cubic feet). All told, North American capital spending jumped 116% to $70.0 billion in 2000 from $32.5 billion in 1999. Much of that money was spent to acquire U.S. proved reserves. In the U.S., exploration and development (E&D) spending rose 72% while proved property acquisition costs increased 256% to $27.8 billion. Transactions by BP Amoco ($9.2 billion), Phillips Petroleum Co. ($5.2 billion) and Occidental Petroleum Corp. ($3.7 billion) accounted for more than three-fourths of the activity. In Canada, E&D spending rose 77%, and proved property acquisitions increased 58%. "North American drilling activity remains relatively high, creating a likelihood that North American exploration and development spending will continue to increase in 2001 and into 2002," says Victor A. Burk, managing partner of Andersen's energy and utilities industry practice. "There also is renewed interest among the majors and independents in exploration and production investments in North America." However, all of this spending was relatively small in comparison with pretax operating cash flow. Last year was the first in the past five in which U.S. E&D spending fell below 50% of the companies' pretax operating cash flow. The 44% figure, however, was in comparison with gigantic pretax operating cash flow, however. Actually, E&D spending rose, to $81.1 billion in 2000 from $65.2 billion in 1999. Meanwhile, pretax operating cash flow totaled $151.1 billion in 2000, compared with $64.7 billion in 1999. "Although we can be virtually certain these trends do not signal the beginning of a period of predictability in energy markets, we can see signs that companies are positioning themselves better to manage successfully and sustainably through the cycles," Burk says. "The increases in spending and drilling activity are not indicative of excessive or speculative spending that might occur during a boom cycle. To the contrary, particularly with many of the performance measures improving and with the increase in natural gas production answering increased demand, the numbers describe a global industry reacting vigorously and efficiently to marketplace changes and opportunities." The survey companies reduced U.S. reserve replacement costs 6% in 2000 to an average $4.79 per barrel of oil equivalent (BOE). U.S. finding and development costs declined 2% to $5.27 per BOE including revisions, and 3% to $6.42 per BOE excluding revisions. U.S. proved reserve acquisition costs dropped 5% to $4.39 per BOE. For only the second time in five years, survey companies replaced more than 100% of U.S. production through the drillbit-130% of oil production and 128% of gas production. From all sources-including net reserves added through extensions and discoveries, improved recovery, revisions of previous estimates and purchases and sales of reserves -the companies replaced 301% of their U.S. oil production and 255% of their gas production, bringing the five-year production replacement rate averages to 159% for oil and 139% for gas. Capital spending outside North America declined 14% to $54.1 billion. E&D spending rose by just 1% to $44.9 billion. Outside the U.S., reserve replacement costs increased 10% to average $4.15 per BOE, finding and development costs including revisions were up 11% to $4.13 per BOE, and excluding revisions were down 11% to $5.81 per BOE. Proved reserve acquisition costs outside the U.S. increased 7% to $4.20 per BOE. The increases in exploration and development activity produced the highest reserve levels of the survey period, both in the U.S. and worldwide. Oil reserves rose 7% worldwide to 93.4 billion barrels and 19% in the U.S. to 19 billion barrels. Gas reserves increased 9% worldwide to 402.7 trillion cubic feet (Tcf) and were up 18% in the U.S. to 114.5 Tcf. New gas discoveries and reserve extensions added more than 36 Tcf of reserves worldwide. Worldwide in 2000, companies replaced 96% of oil production and 133% of gas production through the drillbit. From all sources, worldwide replacement rates for oil were 186% and 223% for gas. The Andersen survey companies each have proved oil and natural gas reserves of more than 5 million equivalent BOE. As a group, these companies account for an estimated 87% of total U.S. crude oil and natural gas liquids reserves and 68% of total U.S. natural gas reserves. The group includes 34 companies headquartered outside the United States, including for the first time three Chinese oil companies now listed in the United States. M