Norwalk, Conn. and London (September 4, 2008) -- The worldwide upstream investment of 232 oil and gas companies was unchanged at $402 billion in 2007, according to the 2008 Global Upstream Performance Review, released today by oil and gas research firm IHS Herold Inc. and upstream corporate advisor Harrison Lovegrove & Co. Ltd., a Standard Chartered group company. Record development spending, up 20 percent from 2006, generated just a 0.3 percent increase in reserve volumes to 264 billion barrels of oil equivalent (boe). Acquisition spending fell 30 percent from 2006 record levels to $90 billion, but remained at a historically high level.

“Higher prices drove a 10 percent increase in revenue to $931 billion,” said Robert Gillon, IHS Herold senior vice president and co-director of Equity Research. “But cost pressures have been unrelenting, with lifting costs rising by 17 percent and government take up 5 percent to $253 billion, or 51 percent of pre-tax profit. As a result, net income edged up 2 percent to $246 billion, which is a record result but is far from the heady advances of the prior three years.”

Standard Chartered Bank Managing Director Rodney Schmidt commented, “A positive result is that oil and gas producing operations generated cash flow of $430 billion in 2007, up 10 percent from 2006, which is larger than capital outlays by about 7 percent. However, emerging issues, such as potential structural changes to demand and the impact of waning prices while cost pressures remain, will undoubtedly impact the industry’s performance going forward.”

The IHS Herold/Harrison Lovegrove study found returns to oil industry shareholders during 2007 remained robust. Dividends increased 11 percent to $92 billion, and common share repurchases totaled $94 billion, 5 percent higher than in 2006. Combined, these payouts amounted to just over 50 percent of corporate net income and the payout ratio has been virtually unchanged over the past five years.