Exploration and production (E&P) spending in the United States is still on track to jump by double digits from a year ago, tempered by less spending in the Gulf of Mexico (GOM) in the last half of the year, said Barclays Capital Wednesday.
“The Original E&P Spending Survey,” published by Barclays twice a year, attempts to include “every meaningful spender on exploration and production” throughout the world including integrated producers, independents and national oil companies, said Jim Crandell, who initiated the survey in 1982. He compiled the latest results with colleague James West.
The Barclays survey follows IHS Herold’s E&P spending survey, which was issued on Tuesday. IHS Herold’s survey found that global spending in 2010 would rise by 8%, with North American spending up 24% (see Daily GPI, June 16).
“E&P expenditures are estimated to rise by 18% in the United States to $85 billion, by 9% internationally to $335 billion, and by 28% in Canada to $27 billion,” said Crandell. “This compares with our December survey, which indicated increases of 12% in the U.S., 10.5% internationally and 23% in Canada” (see Daily GPI, Dec. 21, 2009).
According to Barclays’ survey of 220 U.S. operators, the 18% jump in U.S. E&P expenditures to $85 billion this year from 2009 is 6% higher than the survey reported in December.
“North America-based independent firms have been the most aggressive in increasing spending plans,” said Crandell. “Many smaller firms (spending under $100 million) anticipate significant year-on-year increases in spending in 2010.
“The reasons for the increased spending growth in the U.S. are higher oil price expectations, success in drilling in shale, drilling to hold leases and hedging. This more than offsets lower natural gas price expectations.”
Because of the GOM drilling moratorium, U.S. offshore spending is expected to fall 2% from the December forecast, but it still is tracking to be 18% higher than in 2009, the Barclays analysts said. In the December survey, companies had predicted offshore spending would be 20% higher than a year ago; the 2% reduction translates into $1.6 billion less earmarked for the GOM.
Worldwide E&P spending is forecast to jump by 12% this year to $447 billion from $400 billion in 2009, as estimated by the 427 companies surveyed.
“The average commodity prices on which companies are basing their 2010 budgets have increased to $73.56/bbl for oil (up 5% from the level indicated in our December survey) and declined to $4.65/Mcf for natural gas (down 11% from the level indicated in December),” said Crandell.
“Growth in E&P expenditures is anticipated to continue in 2011 by well over half of companies surveyed, with 37% indicating spending would be up 20% or more, 16% saying they expect to raise spending by 10-20% and 7% expecting more modest increases of 1-10%,” he said.
Canada is expected to see a 28% jump in E&P spending to $27 billion this year from 2009.
Spending outside North America is forecast to climb by 9%, slightly lower than the 10.5% increase detailed six months ago. Most of the cut in spending is from Russian projects, where spending was cut to 13% from 20% partly on weather-related delays, Barclays said. In the Middle East and Africa, E&P spending is likely to jump 16% from 2009, slightly ahead of the 15% previously forecast.
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