Global exploration and production (E&P) spending is forecast to grow by about 9% this year, with U.S. money targeting unconventional and deepwater plays, according to a survey by the energy team at Dahlman Rose & Co.

The spending survey of 460 global E&Ps, which has been compiled annually in some form by energy analyst Jim Crandell, found that global capital expenditures (capex) would rise by 9.3% year/year to a record $595 billion. The growth mostly will be from increased worldwide spending to tap unconventional oil and natural gas deposits, as well as more deepwater exploration.

"The results of our exploration and production spending survey support our thesis of a long upcycle" in international spending, "as well as our emphasis on beneficiaries of horizontal drilling in the shales and the increase in ultra-deepwater drilling," Crandell said in a note to clients. "We continue our broad-based positive stance toward investing in the group, with a focus on large-cap oil service and equipment companies, land drillers and North American services."

In the United States E&P capex is forecast to jump 11% and be up for the third straight year, propelled by horizontal drilling for liquids-rich gas and oil deposits. The double-digit increase in domestic E&P capex is the largest projected growth for any region this year, Crandell noted.

Companies based their E&P capex plans on assumed average U.S. gas prices of $3.84/Mcf and oil prices of $84.72/bbl. However, almost half of those surveyed (45%) said they would cut North American capex plans if Henry Hub prices fell to $3.00/Mcf or below.

According to the Dahlman survey, the large integrated and international oil companies, led by No. 1 U.S. gas producer ExxonMobil Corp., BP plc and France's Total SA, are planning to invest on average about 9% more this year in international E&P projects, with the bulk of spending in North America's onshore, as well as international deepwater projects. Independents' spending, mostly in the onshore, is forecast to be more modest. Canadian E&P is expected to be up 5% year/year.

Last Friday Total completed a joint venture agreement (JV) with Chesapeake Energy Corp. to explore the emerging Utica Shale (see Daily GPI, Jan. 4). Total became a U.S. shale player after signing a JV with Chesapeake in the Barnett Shale two years ago (see Daily GPI, Jan. 5, 2010).

E&P spending will be weak in Latin America and flat in Russia, offset by higher spending in North Africa, the Asia-Pacific region and in Australia, the survey found.

The survey is in line with the annual survey published last month by Barclays Capital, which Crandell previously managed before moving to Dahlman last year (see Daily GPI, Dec. 6, 2011). The Barclays survey found that worldwide E&P capex would approach $600 billion in 2012.

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