After-tax profits for US oil and gas producers dropped 58% in 2012 as E&P activity and money spent on acquisitions increased. Overall, capex for a select group of companies skyrocketed to US $185.6 billion from $155.2 in 2011. The findings were revealed as part of Ernst & Young’s sixth annual US oil and gas reserves study. The capex for the 50 companies was the highest in the study’s history. Accounting for more than half of the increase was development spending, which increased $17.7 billion to $103.4 billion in 2012. These extra dollars targeted tight oil and liquids activity as low natural gas prices forced operators to switch to more lucrative plays. Exploration spending went from $22 billion in 2011 to $26.3 billion. “The large independents accounted for the biggest rise in combined exploration and development spending. Their spending increased 36% while spending by the integrated companies increased 20% and the smaller independent segment increased by 1%,” Ernst & Young said in a news release. “As the smaller independent’s reserves are generally more weighted toward natural gas, the low gas prices throughout much of 2012 had a substantial impact on their cash flows and spending ability.” Shell was ranked as the biggest exploration spender, doling out $4.9 billion, more than twice the amount spent by the second highest spender in exploration, Chesapeake Energy Corp., at $2.3 billion. Others pouring billions into exploration efforts were Marathon Oil Corp., $1.6 billion; ConocoPhillips, $1.4 billion; and Apache Corp., $1.4 billion, according to the study. Even more investment was put into development, where Exxon Mobil Corp. took the lead in spending with $7.7 billion, followed by Chesapeake Energy, $6.7 billion; Chevron, $6.6 billion; EOG Resources, $5.6 billion; and Occidental Petroleum Corp., $5.3 billion. More money also was spent in 2012 on acquiring property, according to the study, which showed that companies spent 17% more to acquire properties compared with 2011. Figures revealed that spending on proved properties jumped to $21.6 billion from $14 billion in 2011. BHP Billiton Group took the lead in this category with about $4.7 billion spent, mainly due to its acquisition of Petrohawk Energy. Following closely behind was Plains E&P Co. at $4.1 billion. The study noted the company acquired interests in Gulf of Mexico fields from BP and Shell. Rounding out the top five in proved properties acquired were Linn Energy, $2.5 billion; SandRidge Energy, $1.8 billion; and Occidental Petroleum Corp., $1.7 billion. The study also revealed that oil reserves increased 13%, going from 20.7 Bbbl in 2011 to 23.3 Bbbl in 2012. However, the story wasn’t the same for natural gas, which saw a 10% drop in reserves driven by low natural gas prices. End-of-year reserves fell to 165.1 Tcf in 2012 from 184.3 Tcf in 2011, according to the study. But production of both oil and gas increased. Oil production rose from 1.4 Bbbl to 1.6 Bbbl, while natural gas production went from 13 Tcf to 13.6 Tcf. “Although total oil and gas production increased 7% in 2012, it could not compensate for the $26.4 billion in property impairments recorded due to low natural gas prices,” Ernst & Young said. “These impairments, paired with a price-driven 3% decrease in revenues and increases in other costs, contributed to a 58% fall in after-tax profits for study companies.” Contact the author, Velda Addison, at