‘Tis the season to spend money, and many of North America’slarge and small producers are doing just that, dropping bonusesinto the envelopes of newly expanded exploration and developmentprograms for the coming year. In recent days, both U.S. andCanadian producers have announced visions of increased energyproduction next year, with most of the promise in domestic naturalgas development.

On the U.S. side, Mitchell Energy & Development Corp. thisweek increased its capital spending budget 45% for the coming year,allocating $325 million of the $473 million total for explorationand production alone. Another $124 million will be set aside forgas services. All of the capital spending is expected to come fromoperating cash flow.

“This is our highest capital spending program since the early1980s and reflects plans for accelerated development of theextensive inventory of undrilled locations in our core fields,”said CEO George P. Mitchell. “At this spending level, we expect toadd significant proved reserves during 2001 and increase productionof both natural gas and natural gas liquids by at least 25% and20%, respectively, versus this year’s volumes. These targets exceedour previously announced growth expectations of 20% and 15%.”

In exploration and production, The Woodlands, TX-basedindependent will spend $263 million to drill 364 gross wells, upfrom its 211 wells this year. Most of the increase will come in theBarnett shale, where 276 new wells are included with a 12-rigprogram, more than doubling the number of wells drilled there thisyear. Also, a 50% increase in drilling to more than 40 wells isplanned for the Personville field area, and $40 million will be setaside for an “aggressive rework program” in the Barnett and otherfields.

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

Alaskan exploration is where it’s at for Bartlesville, OK-basedPhillips Petroleum, which this week increased its capital spending25% for next year. The company approved a capital spending budgetof $2.5 billion for 2001, up from $2 billion in 2000, and nearly87% of the spending will be directed toward exploration andproduction programs.

Phillips said that more than half, about 53% of the 2001 budget,would be spent domestically, with the Alaskan business unitreceiving 77% of the planned domestic spending. U.S. coalbedmethane plays also are included in exploration plans. In Alaska,Phillips plans to spend $914 million, including a study now underway on the potential North Slope pipeline to the Lower 48. (Lastweek, BP, Exxon Mobil and Phillips said they were jointly studyingconstruction of a pipeline.)

Funding also is earmarked for developing Alpine and Meltwaterfields and the satellite fields of both Prudhoe Bay and the GreaterKuparuk Area. In the Lower 48, Phillips plans to develop coalbedmethane projects in the San Juan, Powder River and Uinta basins, aswell as natural gas fields in north Louisiana.

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

In what CEO Roger C. Beach called a more “disciplined” capitalspending approach, Unocal Corp. also upped its budget for 2001 to$1.6 billion, a slight increase from this year’s budget of $1.4billion. The spending forecast includes higher exploration drillingin 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 tospend about $930 million, including $130 million for its Gulf ofMexico deepwater exploration drilling. It also plans to spend $350million for exploration and production projects on the Gulf shelfand the Permian Basin, through its 65%-owned Pure Resources Inc.These projects all are expected to generate additional natural gasproduction volumes.

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

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

“In 2001, AEC expects to maintain its position as Canada’slargest natural gas producer, and we will continue our strongdomestic 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 pastfive years and said that now, nearly two-thirds of its totalproduction — 61% — is natural gas.

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

Along with its investments in E&P, AEC will put another $2.1billion in other company operations, and expects to sell nearly$225 million in non-core assets in 2001 (which reduces its net corespending to the $1.9 billion figure). It also will drill 1,225wells, 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, with67% of the total going to exploration and production in WesternCanada. 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 forGulf Canada’s worldwide development and exploitation projects, andanother 32% of the money will be spent on exploration. Productionvolumes are expected to grow next year to 817 MMcf/d and 148,000bbl/d of liquids. Almost 75% of the gas production will come fromNorth American development alone.

“The acquisition of Crestar has doubled our North American gasproduction and we will be focusing on gas in our exploration anddevelopment programs,” said CEO Dick Auchinleck. “Gulf willcontinue to live within its cash flow.” He said that the companyhas the flexibility to alter its planned investments in the comingyear because many of its Western Canadian projects “where we’veinvested most of the money,” are smaller with shorter lead times.

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