Unpacking the decline: Australian E&P capital trends in a global context

In 2015, ASX-listed exploration & production (E&P) companies raised almost A12 billion in capital, marking a peak in their recent fundraising efforts. However, this has declined annually since, with only about A1. 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.