‘Tis the season to spend money, and many of North America’s large and small producers are doing just that, dropping bonuses into the envelopes of newly expanded exploration and development programs for the coming year. In recent days, both U.S. and Canadian producers have announced visions of increased energy production next year, with most of the promise in domestic natural gas development.

For U.S. independents like Mitchell Energy & Development Corp., the budget increases are the biggest in nearly 20 years. Across the Canadian border, companies like Talisman Energy Inc. plan to ramp up exploration and production in some of the biggest-ever-announced programs. All are going after natural gas.

In the United States, Mitchell Energy last week increased its capital spending budget 45% for the coming year, allocating $325 million of the $473 million total for exploration and production alone. Another $124 million will be set aside for gas services. All of the capital spending is expected to come from operating cash flow.

“This is our highest capital spending program since the early 1980s and reflects plans for accelerated development of the extensive inventory of undrilled locations in our core fields,” said CEO George P. Mitchell. “At this spending level, we expect to add significant proved reserves during 2001 and increase production of both natural gas and natural gas liquids by at least 25% and 20%, respectively, versus this year’s volumes. These targets exceed our previously announced growth expectations of 20% and 15%.”

In exploration and production, The Woodlands, TX-based independent will spend $263 million to drill 364 gross wells, up from its 211 wells this year. Most of the increase will come in the Barnett shale, where 276 new wells are included with a 12-rig program, more than doubling the number of wells drilled there this year. Also, a 50% increase in drilling to more than 40 wells is planned for the Personville field area, and $40 million will be set aside for an “aggressive rework program” in the Barnett and other fields.

With its E&P program trained on Texas, Mitchell said the company expects to maintain its capital program at the new level “for at least the next three years and increase our natural gas production over this period by more than 20% compounded annually.”

Another independent, Houston-based Nuevo Energy Co., increased its capital budget on Friday 51% to $181 million. Of the total, the company will use 78%, or $141 million, to target exploitation projects, primarily earmarked for building projects onshore California. Another 15%, or $27 million, will go toward new exploration, mainly for drilling 12 exploration wells in California and Africa.

Onshore California’s single largest exploitation project for the coming year is the continuing development of its Star Fee acreage in the Cymric Field. Offshore California, Nuevo’s capital spending will be directed toward drilling in the Santa Clara Field and in the Pitas Point Field to increase natural gas production. In its base 2001 capital budget, Nuevo’s production is forecast to be 21.6 MM boe, a 9% increase in production from this year.

Alaskan exploration is where it’s at for Bartlesville, OK-based Phillips Petroleum, which increased its capital spending 25% for next year. The company approved a capital spending budget of $2.5 billion for 2001, up from $2 billion in 2000, and nearly 87% of the spending will be directed toward exploration and production programs.

Phillips said that more than half, about 53% of the 2001 budget, would be spent domestically, with the Alaskan business unit receiving 77% of the planned domestic spending. U.S. coalbed methane plays also are included in exploration plans. In Alaska, Phillips plans to spend $914 million, including a study now under way on the potential North Slope pipeline to the Lower 48. Two weeks ago, BP, Exxon Mobil and Phillips said they were jointly studying construction of a pipeline (see NGI, Dec. 11).

Funding also is earmarked for developing Alpine and Meltwater fields and the satellite fields of both Prudhoe Bay and the Greater Kuparuk Area. In the Lower 48, Phillips plans to develop coalbed methane projects in the San Juan, Powder River and Uinta basins, as well as natural gas fields in north Louisiana.

“Our 2001 budget reflects the dramatic change our company has undergone in the past year,” said Jim Mulva, CEO. Phillips will spend $1 billion on international projects, and Mulva said the company would build “on our legacy asset positions in Alaska and Norway,” and move forward with the development of its three international legacy projects, Hamaca, Bohai Bay and Bayu-Undan.

In what CEO Roger C. Beach called a more “disciplined” capital spending approach, Unocal Corp. also upped its budget for 2001 to $1.6 billion, a slight increase from this year’s budget of $1.4 billion. The spending forecast includes higher exploration drilling in the Gulf of Mexico and in international projects in Kalimantan, Indonesia and Brazil and Gabon.

In North America, the El Segundo, CA-based company expects to spend about $930 million, including $130 million for its Gulf of Mexico deepwater exploration drilling. It also plans to spend $350 million for exploration and production projects on the Gulf shelf and the Permian Basin, through its 65%-owned Pure Resources Inc. These projects all are expected to generate additional natural gas production volumes.

“We will maintain discipline in our capital spending even in the face of extremely high commodity prices,” said Beach. “The spending will add production in Southeast Asia and in the Gulf of Mexico shelf and the U.S. Permian Basin, which will allow us to take advantage of higher expected natural gas realizations.”

Embarking on what it calls its biggest exploration program ever, Calgary-based Talisman Energy purchased more than 475,000 net acres for $66 million in Canada this year, with most targeting natural gas exploration.

“We have the people, opportunities, rigs and capital to support the largest drilling program we have ever undertaken in Canada,” said CEO Dr. Jim Buckee. “We plan to drill 650 wells next year, up 20% from 2000.”

Nearly 95% of Talisman’s spending on land targets natural gas prospects: about 38% of the new Canadian land is in the Peach River Arch region of Alberta, while 14% is in Alberta’s Rocky Mountain foothills and 11% is in the Alberta deep basin region.

In another of the more ambitious announcements from Canada, Calgary-based independent Alberta Energy Company Ltd. plans to grow its natural gas sales by 23% next year. AEC will invest a net $1.9 billion in 2001 core capital programs to drive its daily sales to more than 1.3 Bcf and liquid sales to more than 140,000 bbl.

“In 2001, AEC expects to maintain its position as Canada’s largest natural gas producer, and we will continue our strong domestic and international oil growth,” said CEO Gwyn Morgan. “Total production is expected to ramp up by more than 20% in 2001, to exceed 360,000 boe/d.” Morgan said that AEC had built one of “North America’s strongest storehouses of natural gas” in the past five years and said that now, nearly two-thirds of its total production is natural gas.

AEC also has allocated $185 million to “new ventures” exploration next year, directed toward establishing the company’s next “growth platforms.” In the first quarter of 2001, AEC will drill its first Alaskan well, and it also plans “extensive seismic programs” for Alaska and the Mackenzie River Delta.

Along with its investments in E&P, AEC will put another $2.1 billion in other company operations, and expects to sell nearly $225 million in non-core assets in 2001 (which reduces its net core spending to the $1.9 billion figure). It also will drill 1,225 wells, up 25 from this year, with 900 gas wells and 325 oil wells.

Another Calgary-based independent, Gulf Canada Resources Ltd., is setting aside $1.2 billion in its capital spending budget, with 67% of the total going to exploration and production in Western Canada. The company’s primary operations are in Western Canada, Indonesia, the Netherlands and Ecuador.

Of the total planned budget for next year, 68% is earmarked for Gulf Canada’s worldwide development and exploitation projects, and another 32% of the money will be spent on exploration. Production volumes are expected to grow next year to 817 MMcf/d and 148,000 bbl/d of liquids. Almost 75% of the gas production will come from North American development alone.

“The acquisition of Crestar has doubled our North American gas production and we will be focusing on gas in our exploration and development programs,” said CEO Dick Auchinleck.

Carolyn Davis, Houston

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