Capital spending by exploration and production (E&P) companies likely will continue this year at a fairly modest pace but analysts foresee expenditures rising in 2022 from strong cash flow and tighter oil and gas supply.

A revival in global capital expenditures is underway following the downturn of 2020, but producers are remaining disciplined in their financial outlays, Evercore ISI analysts noted. 

However, a continued “supportive commodity price backdrop” should result in a boost in spending for 2022. 

North American E&P capex in 2022 “could be up by as much as 20% year/year,” said the Evercore analysts led by James West. “The upstream is poised to generate strong cash flow and when budgets reset early in 2022, large operators will increase their drilling and...