Optimism among North American natural gas and oil producers appears to be rising, with capital expenditures (capex) expected to jump overall by 12% in 2010 to $79 billion, Barclays Capital analysts said in their year-end 2009 survey. The biggest growth will come from an uptick in gas shale drilling.

Those statistics and more were gleaned from “The Original E&P Spending Survey” by the Barclays team, which analyzes worldwide E&P spending twice a year. The 32-page report, initiated in 1982, details the responses to a survey of 387 producers worldwide and indicates exploration spending overall will jump by 11%, or to $439 billion in 2010 from $395 billion this year.

“Increases by U.S. independents have been particularly strong,” said lead analyst Jim Crandell. “The gains are driven by increased spending in the newer shale plays, such as the Haynesville and Marcellus, and higher oil-related expenditures.

“We are surprised by the magnitude of the indicated increase in E&P spending,” he said. “The incremental production that increased drilling could bring could put further pressure on natural gas prices and potentially lead to another drilling downturn as early as the second half of 2010.”

Domestic E&P expenditures are expected to rise by 12% to $79 billion from $71 billion in 2009, according to the 197 producers surveyed. In Canada, budgets are slated to increase 23% to US$23 billion from $19 billion this year, 126 producers reported.

“This follows a sharp fall in spending in 2009, when North American capital expenditures declined due to the collapse in commodity prices and difficult credit markets,” said Crandell. “North American independents are highly sensitive to commodity prices and cash flow and adjust budgets quickly as industry conditions warrant.”

In the United States “traditional vertical well drilling (such as in the shallow-water Gulf of Mexico and onshore Gulf Coast) “is not expected to participate in the upturn, Crandell said.

Of the 197 companies with spending in the United States that Barclays surveyed, 80 (41%) are expected to increase spending by more than half in 2010. Thirty-seven companies (19%) are expected to raise spending by between 10% and 30%. Fifty-two companies (26%) said they would keep capex relatively flat year-on-year. Thirteen companies (7%) plan to cut capex by 10-30% next year and 15 companies (8%) are expected to cut capex by more than 30%.

Among the larger gas-directed U.S. independents, SandRidge Energy Corp. is seen lifting capex by 54%, Devon Energy Corp. is seen hiking its spending by 45%, Chesapeake Energy Corp. by 40%, Range Resources Inc. by 27% and EOG Resources Inc. by 21%.

Large companies that Barclays estimates will reduce their 2010 U.S. capex budgets include ConocoPhillips (down 23%), Royal Dutch Shell (9%), Plaints Exploration and Production Co. (40%) and Williams (8%).

In Canada Imperial Oil Ltd. is expected to raise its spending by half (50%), while Canadian Natural Resources Inc. is likely to spend 64% more in 2010 than 2009, according to the survey.

Spending by the supermajors will see “minor” upticks, according to Barclays. The “big six” are expected to increase international spending by about 1% in the aggregate. BP plc and Total are seen keeping spending flat, while ConocoPhillips will increase spending by 14% and ExxonMobil Corp’s will rise by 11%. Chevron Corp. is expected to reduce capex by 5%, while Royal Dutch Shell’s capex will be cut by 6%, analysts said.

Meanwhile, international capex overall is expected to rise by 10% in the new year from 2009, which would return to the growth its had in 10 of the past 11 years. International spending is expected to be $337 billion, according to 134 companies surveyed, with most of the higher spending by national oil companies.

The 2010 budgets reflect a natural gas price forecast of $5.21/Mcf, compared with $6.35 in the year-ago survey and $4.68 in the midyear survey, the Barclays report noted. The budgets also are based on higher average crude oil prices of $70.16/bbl West Texas Intermediate price, compared with $50.18 in the midyear 2009 survey and $58.30 in the year-ago survey.

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