Analysts: E&P spending to jump more than 19% in 2001


Worldwide spending on exploration and production of oil and natural gas will jump more than 19% next year, based on �the largest, most comprehensive study ever� among both independent and integrated operators, officials of Lehman Brothers reported Monday.

A Nov. 13-Dec. 15 survey of 344 producers revealed that most plan to increase US upstream spending by an average 19.1% in 2001. Among the independents, who have been the primary drivers in the upstream recovery over the past 18 months, the proposed increase is even bigger, with 231 of those companies increasing their budgets an average 21.7%.

The major integrated companies are increasing their US upstream spending by 15.9% on average, according to the report authored by James D. Crandell, who did similar surveys for Lehman Brothers this past May and in December 1999.

But the �most encouraging� news from the latest survey is that budgets for international exploration and production also will rise significantly next year, with 113 of the surveyed companies planing an average increase of 19%, Crandell reported. That�s �well above the 4.1% increase expected in 2000,� he said. Producers generally have underspent their international E&P budgets this year.

Most of the gain in international spending is a result of large budget increases by two supermajors, BP and the Royal Dutch/Shell Group, up from depressed levels this year. However, Lehman Brothers also reported substantial budget increases among large US independents ranging from 11% by Pogo Producing Co. in Houston to 79% at Cross Timbers Oil Co. in Ft. Worth, Tex.

For the second consecutive year, Canada is poised to show the most improvement with an average 19.9% increase in spending next year by 84 of the companies surveyed, Lehman Brothers reported. Both US and Canadian projected E&P expenditures are above original estimates of the mid-year survey in May.

The projected strong increase in E&P spending for next year is driven primarily by high natural gas prices�particularly in the US and Canada�and the resulting strong cash flow to producers.

However, Crandell said, �Unlike 2000, where the growth in spending was highly skewed towards North American natural gas drilling, the planned increases in 2001 E&P expenditures are broad based.�

Lehman Brothers� bullish outlook for increased upstream spending next year is supported by reports of other industry participants and analysts. Raymond James & Associates Inc. earlier this month reported that budget increases already reported by 21 independents averaged 25%, supporting �a consensus increase of about 20%.�

However, Raymond James analysts reported, �We believe these estimates are understating the amount of actual 2001 E&P spending increases by one-third.�

That�s because producers still �are taking a cautious approach to the sustainability of higher energy prices,� they said.

Indeed, respondents to Lehman Brothers� latest survey said they were basing their projections on average prices of $25/bbl for oil and $3.75/Mcf for natural gas. But they said they would increase their budgets another 19% if oil prices were in the range of $30-$35/bbl.

Moreover, Raymond James officials predicted, �Given the limited service company infrastructure, E&P costs are likely to explode over the next year. In other words, E&P budgets will be up 20% next year only if companies drill the same number of wells as last year. Our guess is they intend to drill more wells next year.�

Of those companies surveyed by Lehman Brothers, 94% said they expect drilling costs to rise next year, especially day-rates for drilling rigs. A solid majority, 63%, said higher rig rates would affect their drilling programs.

As a result, more producers are trying to lock in suppliers�especially drilling contractors�through long-term contracts or multiple-well deals. They also plan to put more jobs out for bid and to do more turnkey deals in an effort to reduce costs, Lehman Brothers reported.

The report said 71% of the companies surveyed expressed concern over a lack of equipment to carry out their drilling programs. A substantial majority is even more concerned about availability of qualified personnel.

�This is especially true for North American-oriented companies, many of whom think it is the largest problem that the industry faces today,� Crandell said.

Related Articles

XTO Energy focuses on US long-life gas reserves

10/28/2004 XTO Energy Chairman and CEOBob R. Simpson "We will keep our discipline, and we will make acquisitions that make sense, or we will do something els...

Point of View: XTO Energy focuses on long-life US gas reserves

10/25/2004 XTO Energy Inc., Fort Worth, made acquisitions worth almost $2.5 billion across the US during the last 2 years, with an emphasis on expanding the E...

XTO picks Lower 48 onshore gas as 'the better way to go'

10/21/2002 XTO Energy Inc., Fort Worth, Tex., is an acquisition and development firm that decided in the late 1990s that its best chance for success was explo...

Finance/Companies news briefs, May 21

05/21/2001 Denerco Oil ... Intrepid Energy North Sea ... Norway Petroleum Fund ... CTE ... Osinerg ... Serpet Consult ... Perupetro ... Australian Worldwide E...

Cross Timbers Oil reports record proved reserves

03/08/2001 Cross Timbers Oil Co., Fort Worth, Tex., reported Thursday an 11% increase in its proved oil and gas reserves to a record 2.25 tcf of natural gas e...

Geological problem, geophysical tool: An alternate workflow

03/05/2001 Cross Timbers Oil Co. obtained controlling interest in Middle Ground Shoal field from Shell Oil Co. in 1998.

Executive Q&A: Crosstimbers' Bob R. Simpson

01/29/2001 Bob R. Simpson, chairman and CEO of Cross Timbers Oil Co., Forth Worth, heads one of the fastest growing independents in the US. In an exclusive in...

Bossier gas activity paces East Texas operations

01/29/2001 Operators plan to turn up the heat this year on Cretaceous and Jurassic exploration and development drilling in the East Texas basin.

Worldwide E&P spending expected to jump sharply in 2001

01/08/2001 Worldwide spending on exploration and production of oil and natural gas will jump more than 19% next year, based on what Lehman Bros. called "the l...

White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

Available Webcasts



Global LNG: Adjusting to New Realties

When Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

When Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST



On Demand

The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected