A survey of 31 of the most aggressively-drilling U.S. independents showed a 34% increase in exploration and development (E&D) spending in 2003 at the same time those companies were experiencing a 69% increase in total cash flow, according to Raymond James & Associates.

Based on early projections, the investment house is predicting another 26% growth in E&D in 2004, for a total of about $17.1 billion. The total for 2003 was $13.5 billion. Raymond James (RJ) notes the 31 companies in its survey are among the most aggressive E&D companies, but predicts that other independents will follow on with a 10% hike in E&D spending in 2004. The majors, whose E&D spending has been essentially flat, could see as much as a 5% increase this year.

Analyzing 2003 spending for the 31 fast-moving companies, RJ points to total cash flow(before changes in working capital) of $19.1 billion and total spending of $19.8 billion. Besides the $13.5 billion spent for E&D (68%), another $5.8 billion (30%) went for property acquisitions and $420 million (2%) for stock buybacks.

For 2004, the companies have budgeted $14.9 billion for E&D, but RJ expects this to increase about 10%, as it did last year. In addition, the investment house expects fewer acquisitions than last year, which will mean additional sums will go into developing companies’ own resources.

Half of the companies surveyed are pure domestic plays, and overall the group mostly focuses on North America to the tune of 2/3 gas and 1/3 oil. The large cap companies (more than $2.5 billion market cap) included in RJ’s U.S. coverage universe are Anadarko, Apache, Burlington, Chesapeake, Devon, EOG, Pioneer and XTO. Medium and small cap companies are ATP Oil & Gas, Brigham Exploration, Callon Petroleum, Comstock Resources, Denbury Resources, Edge Petroleum, Evergreen Resources, Forest Oil, KCS Energy, Magnum Hunter, Meridian Resources, PetroQuest Energy, Quicksilver Resources, Remington Oil & Gas, Southwestern Energy, Spinnaker Exploration, St. Mary Land & Exploration, Tom Brown, Ultra Petroleum, Vintage Petroleum, Western Gas Resources, Whiting Petroleum & Wiser Oil.

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