Oil and gas producer North American capital expenditures (capex) will continue to grow next year but not as fast as it did this year, predicted analysts at Raymond James & Associates Inc. The global economic outlook and oil prices will drive spending trends, the firm said.

“…[C]apital spending in 2012 should be up 10% to 15% to around $78 billion if the oil strip holds $85,” analysts said in a last week. However, oil price volatility could put a damper on some spending, they said. Further, energy patch development cost pressures might be alleviated through the advent of greater efficiencies.

“Consequently, we believe outspending of cash flow should not differ greatly from 2011,” the analysts said. “On current strip pricing of roughly $85/bbl, large caps are poised to spend 113% of cash flow while small/mid-caps will spend 143% of cash flow.

“Our production forecast for 2012 points to growth of around 14%, slightly above this year’s 11%.”

For the remainder of this year, Raymond James expects U.S. spending to be weighted more toward exploration and development by companies that have already bought up a lot of acreage.

Based on recent executive comments, the analysts suggested that costs have increased 10-20% in hotter plays such as the Bakken and Eagle Ford shales and the Permian Basin. However, “we should note that these cost increases are not manifesting themselves in the same way they have historically,” they said. “In most cases today, pricing increases for traditional drilling and completion are being largely offset by improved efficiencies.”

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