Unpacking the decline: Australian E&P capital trends in a global context
Krishan Pal Birda A * , Kaushal Ramesh B and Arsh Vahie CA
B
C
Krishan Pal Birda is a Senior Analyst who leads Rystad Energy’s Australasia Upstream Research & Analysis team. In addition to monitoring regional activity in Australasia and the E&P firms, he oversees the Australasia Solutions product. His other responsibilities include publishing frequent analyses, product development, and assisting clients on expert matters. Krishan specialises in the Australian gas & LNG markets as well as coal seam gas modelling. He has been employed with Rystad Energy for over 5 years and has a background in Civil Engineering. |
Kaushal Ramesh is Vice President of LNG and Head of Rystad Energy’s Gas and LNG Analytics and manages their published LNG research, focussing on LNG trading, shipping, and investments. His past advisory work includes project economics, regulatory impact studies, market entry strategies and LNG contract negotiations. Prior to joining Rystad Energy, Kaushal worked multiple roles at ExxonMobil, managing commercial operations of LNG and condensate cargoes from the Gorgon project, and gas and power sales contracts in the Asia-Pacific. He also advised on spot cargo trades and LNG contracting and investment decisions as a market analyst. |
Arsh Vahie is Upstream Analyst with Rystad Energy’s Australasia Upstream Research & Analysis team. Alongside Krishan Pal Birda, he oversees regional activity and E&P firms within Australasia. Arsh’s primary focus lies in monitoring Australian gas markets, leveraging his expertise to produce frequent analyses and develop the Australasia Solutions dashboards using PowerBI. He has been employed with Rystad Energy for over 1 year and has a background in Commerce and Finance. |
Abstract
In 2015, ASX-listed exploration & production (E&P) companies raised almost A$12 billion in capital, marking a peak in their recent fundraising efforts. However, this has declined annually since, with only about A$1.2 billion raised in 2022, despite lower Reserve Bank of Australia (RBA) interest rates compared to 2015. The investment ratio, measuring investments relative to cash from operations, plummeted from 187% in 2015 to 20% in 2022. Globally, public E&P players averaged 97% in 2015 and 31% in 2022. Going forward, we expect Australia’s investment ratio to average 31% between 2023 and 2025, compared to the global average of 49%. This paper explores Australian E&P capital expenditure trends against global patterns, attributing the decline to factors such as environmental and legal risks, limited access to capital, regulatory hurdles, and approval delays. For instance, offshore environment plan approvals now take over a year on average, compared to 4 months in 2017. Despite high oil and gas prices, spare infrastructure capacity, and domestic gas market shortfalls, investment activity in Australia wanes. Additionally, merger & acquisition (M&A) activity, often indicating industry interest, dropped by nearly half in Australia in 2022 compared to 2018. This paper examines why Australia lags in capital spend, citing environmental, regulatory, and approval challenges. While global trends show increased spending, Australia’s oil and gas sector faces headwinds in attracting investments and M&A activity.
Keywords: Australia, banks, bonds, capital, delays, equity, export, gas, investments, LNG, M&A, market, policies, policy, prices, regulatory challenges, risk, spending.
Krishan Pal Birda is a Senior Analyst who leads Rystad Energy’s Australasia Upstream Research & Analysis team. In addition to monitoring regional activity in Australasia and the E&P firms, he oversees the Australasia Solutions product. His other responsibilities include publishing frequent analyses, product development, and assisting clients on expert matters. Krishan specialises in the Australian gas & LNG markets as well as coal seam gas modelling. He has been employed with Rystad Energy for over 5 years and has a background in Civil Engineering. |
Kaushal Ramesh is Vice President of LNG and Head of Rystad Energy’s Gas and LNG Analytics and manages their published LNG research, focussing on LNG trading, shipping, and investments. His past advisory work includes project economics, regulatory impact studies, market entry strategies and LNG contract negotiations. Prior to joining Rystad Energy, Kaushal worked multiple roles at ExxonMobil, managing commercial operations of LNG and condensate cargoes from the Gorgon project, and gas and power sales contracts in the Asia-Pacific. He also advised on spot cargo trades and LNG contracting and investment decisions as a market analyst. |
Arsh Vahie is Upstream Analyst with Rystad Energy’s Australasia Upstream Research & Analysis team. Alongside Krishan Pal Birda, he oversees regional activity and E&P firms within Australasia. Arsh’s primary focus lies in monitoring Australian gas markets, leveraging his expertise to produce frequent analyses and develop the Australasia Solutions dashboards using PowerBI. He has been employed with Rystad Energy for over 1 year and has a background in Commerce and Finance. |
References
ASX (2023) Federal court decision on Barossa pipelaying. Press release, 15 November. Available at https://announcements.asx.com.au/asxpdf/20231115/pdf/05xd25y5wy64xs.pdf
ASX (2024) Announcements from oil and gas companies regarding various capital raising activities. Available at https://www.asx.com.au/asx/v2/statistics/announcements.do [accessed 8 February 2024]
Commonwealth Bank of Australia (2022) Leading the transition. Press release, 25 November. Available at https://www.commbank.com.au/articles/business/foresight/leading-the-transition.html
Commonwealth Bank of Australia (2023) Annual Report 2023. Press release, 9 August. Available at https://www.commbank.com.au/content/dam/commbank-assets/investors/2023-08/2023-annual-report_print.pdf
Crystol Energy (2016) Australia’s LNG woes herald changes in global market. Press release, 7 July. Available at https://www.crystolenergy.com/australias-lng-woes-herald-changes-global-market-2/
Department of Industry Science and Resources (2024) Offshore petroleum and greenhouse gas storage environmental management review. Available at https://www.industry.gov.au/mining-oil-and-gas/oil-and-gas/offshore-oil-and-gas/offshore-petroleum-and-greenhouse-gas-storage-environmental-management-review [accessed 5 March 2024]
FSB (2024) FSB Roadmap for Addressing Financial Risks from Climate Change and Task Force on Climate-related Financial Disclosures. Available at https://www.fsb.org/publications/g20-reports/ [accessed 8 February 2024]
Geoscience Australia (2022) Gas | Australia’s Energy Commodity Resources 2022. Available at https://www.ga.gov.au/digital-publication/aecr2022/gas [accessed 21 February 2024]
National Australia Bank (2021) Annual Financial Report 2021. Press release, 9 November. Available at https://www.nab.com.au/content/dam/nab/documents/reports/corporate/2021-annual-financial-report.pdf
NOPSEMA (2024) Approved projects and activities and Under assessment. Available at https://info.nopsema.gov.au/home/ [accessed 8 February 2024]
Santos (2022) Federal court decision on Barossa drilling Environment Plan. Press release, 21 September. Available at https://www.santos.com/news/federal-court-decision/
Santos (2023) 144A bond search results. Available at https://www.santos.com/search/144A+bond/ [accessed 21 February 2024]
Santos (2024) Barossa Gas Project Update. Available at https://www.santos.com/news/barossa-gas-project-update-4/ [accessed 21 February 2024]
Tamboran Resources (2023) Re-domiciliation becomes effective. Press release, 7 December. Available at https://www.investi.com.au/api/announcements/tbn/5795acea-f6f.pdf
Westpac (2021) Interim Financial Results 2021. Press release, 3 May. Available at https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/WBC_ASX_1H21.pdf
Woodside (2024) 144A bond search results. Available at https://www.woodside.com/search-results?indexCatalogue=woodside-all&searchQuery=144a%20bond&wordsMode=AllWords&orderBy=Newest&language=en-AU [accessed 21 February 2024]
Yahoo Finance (2024) Average price-to-earning multiples for the select US and Australian oil and gas companies. Available at https://finance.yahoo.com/ [accessed 8 February 2024]
