North American exploration and production in 2000 will be nearlyall about gas and all about independents, with spending plans ofthe majors largely forsaking this country for opportunitiesoverseas. That’s one finding of Lehman Brothers, which from Nov. 6to Dec. 10 surveyed 320 companies in what it calls “the mostextensive study of oil company spending plans that has ever beendone.”

Not surprisingly, E&P spending decisions are all aboutprice, well, almost. Sixty-eight percent of respondents listed cashflow as the biggest determinant of spending next year. But gasprices were a close second at 67%, followed by oil prices at 59%.The average U.S. gas price assumption for 196 companies answeringthe question was $2.38/Mcf at the Henry Hub; however, $2.50/Mcf wasthe most common forecast. If Lehman is right, producers are bettingconservatively as the firm’s oil service and drilling researchgroup is looking for prices to average $2.55/Mcf.

Domestic E&P budgets are projected to be up “a healthy15.9%,” and Canadian budgets “a staggering 28% on the back ofoptimism about natural gas.” International expenditures areexpected to increase “by a paltry 5.7%.” Lehman said majors, whoare turning away from North America, are still conservative intheir oil price outlook, and mergers are still impacting spendingplans. For instance, Exxon Mobil is projected to decrease spending7% from 1999 amounts spent collectively by Exxon and Mobil. And BPAmoco and Atlantic Richfield (assuming they are combined) areprojected to spend 17% less than they spent collectively in 1999.

On the other hand, independents are budgeting generously for2000. Apache Corp. is planning a 50% increase to $325 million.Union Pacific Resources is predicted to have a 31% increase inspending. Unocal expects an 18% gain. And Vastar Resources sees a20% rise. Other expected big spenders include Kerr McGee with a 38%increase, CNG Producing with a 54% boost in spending, and OceanEnergy, which is growing spending by 38%.

“Just as the independents in the U.S. and Canada drove the[spending] increases in the second half of 1999, they are expectedto do so again in 2000,” Lehman said. “The largest gains of all inE&P spending in 2000 are in Canada where optimism about naturalgas is high, and geology is deemed attractive.”

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.