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

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

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
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


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