Lehman: Worldwide E&P outlays to increase slightly for 2003

By OGJ editors

HOUSTON, Dec. 20 -- Worldwide exploration and production budgets are expected to increase by 4.2% to $132.4 billion in 2003 vs. those for 2002.

International E&P expenditures are expected to remain "solid" in 2003, increasing by 5.5%, while E&P spending in the US is forecast to decline by 0.7% next year. Canada, meanwhile, will be a "relative bright spot for 2003," with E&P outlays estimated to rise 7.2%.

These were some of the key findings of Lehman Bros. Inc.'s semiannual E&P spending survey, which polled 323 companies worldwide during Nov. 15-Dec. 10, including privately held US and Canadian independents and numerous state-owned oil and gas firms. Lehman released the survey Dec. 13.

Major oil firms are doing some of the largest spending cutbacks in the US, said James Crandell, oil services and drilling analyst for Lehman. The 11 major oil companies surveyed are expected to cut their E&P outlays by an average of 1.1%, Crandell said. This decline among the majors was due to a combination of cuts by companies such as ConocoPhillips, Royal Dutch/Shell Group, TotalFinaElf SA, Marathon Oil Corp., and Occidental Petroleum Corp.

Independents, meanwhile, are expected to spend 0.4% less in 2003 compared with 2002. The "disappointing results in the US" are being driven by several factors, Crandell noted. These include:

-- Major oil firms and larger independents are continuing to spend a higher budgetary percentage outside the US.

-- Independents continue to use "conservative oil and natural gas price forecasts" in figuring their budgets and "are looking at little upward change in cash flow," Crandell said.

-- Balance sheet limitations.

-- The lack of "quality prospects."

The companies surveyed based their 2003 budgets on an average West Texas Intermediate oil price expectation of $23.22/bbl. "Should (WTI) average $20/bbl through 2003. . . 37% of the companies surveyed indicated that they would cut back spending," Crandell said.

"This (oil price expectation) is up 10.1% from last December's expectation of $21.09/bbl, however, 15% below the current price," he added.

Those companies surveyed based their 2003 budgets on a Henry Hub natural gas price of $3.42/Mcf, with the most common forecast being $3/Mcf. This price is up from the $2.83/Mcf for 2002, Crandell said. Of the companies surveyed, 33% said that an average of $3/Mcf in 2003 would influence their E&P outlay plans negatively.

"The economics of drilling are seen as favorable to that of purchasing by 71% of companies operating in the US, 74% of the companies operating in Canada, and 88% of the companies operating outside (the US and Canada)," Crandell said.

Only 23% of E&P companies plan to spend greater than their cash flow in 2003, Crandell said. Also, 3D and 4D seismic, horizontal and directional drilling, fracturing, and intelligent well completions were among the most frequently cited technology that is influencing the E&P business, Crandell said.

Three-quarters of the companies surveyed said that higher rig rates would cause them to decrease spending in 2003. "As anticipated, demand for rigs continues to be price elastic," Crandell said, with onequarter of those surveyed reckoning that "the economies of their drilling program can withstand a substantial price shock and remain profitable."

Spending outside US, Canada
The increase in spending outside the US and Canada was led by state-owned firms and European majors, Crandell said. Some of the greatest increases were seen by India's Oil & Natural Gas Corp., which was up by 152% and by Trinidad and Tobago's state-owned oil company Petroleum Co. of Trinidad & Tobago Ltd., which rose 140%.

Among the "impressive gainers" based outside the US and Canada making significant increases in the E&P budgets outside the US and Canada in 2003 were: Petroleos Mexicanos, up 15% to $9.3 billion; Petroleo Brasileiro SA, up 10% to $4.4 billion; OAO Lukoil, up 10% to $1.65 billion; OAO Gazprom, up 33% to $2.3 billion; OAO Yukos, up 22% to $1.1 billion; Statoil ASA, up 13% to $1.8 billion; Norsk Hydro ASA, up 20% to $1.4 billion; Repsol-YPF SA, up 27% to $1.5 billion; and Pruessag Energie GMBH, up 32% to $185 million.

Among the supermajors, increases in spending outside the US and Canada for 2003 were led by ExxonMobil Corp., up 13% to $7.4 billion; BP PLC, up 4% to $4.9 billion; and ChevronTexaco Corp., up 3% to $4.2 billion. ConocoPhillips, meanwhile, remained flat at $2.7 billion and Royal Dutch/Shell Group was down 19% to $6.3 billion.

Other noteworthy budget cuts in E&P spending outside the US and Canada for 2003 were made by the following companies: BG PLC, down 29% to $1 billion; Chinese National Offshore Oil Corp., down 13% to $700 million; EnCana Corp., down 25% to $380 million; ENI SPA, down 15% to $4.1 billion; Kerr-McGee Corp., down 18% to $325 million; Nexen Inc., down 30% to $155 million; OAO Sibneft, down 11% to $625 million; and Talisman Energy Inc., down 4% to $790 million.

US, Canadian spending
Several major oil firms led the decline in E&P expenditure expectations within the US, Crandell noted. These included ConocoPhillips, down 10% to $1.6 billion; Royal Dutch/Shell, down 9% to $1.2 billion; TotalFinaElf, down 29% to $250 million; Marathon Oil, down 7% to $400 million; and Occidental Petroleum Corp., down 8% to $430 million.

Offsetting these declines were two majors that expected to increase E&P spending within the US: BP, up 4% to 4.6 billion, and ExxonMobil, up 5% to $2.5 billion.

Of the independents surveyed, those downscaling their US E&P outlays included Kerr-McGee, down 5% to $575 million; Unocal Corp., down 18% to $982 million; Noble Energy Inc., down 17% to $275 million; Nexen, down 31% to $275 million; J.M. Huber Corp., down 16% to $105 million; Pogo Producing Co., down 5% to $265 million; Spinnaker Exploration Co., down 17% to $270 million; and Swift Energy Co., down 17% to $100 million.

Among the independent firms that expected to increase their E&P spending within the US were: Burlington Resources Inc., up 43% to $392 million; Ocean Energy Inc., up 23% to $600 million; Pioneer Natural Resources Co., up 9% to $310 million; Apache Corp., up 7% to $440 million; and EOG Resources Inc., up 9% to $650 million.

Regarding Canadian E&P spending, Crandell said, "While companies in Canada are impacted by similar factors as those operating in the US, cash flows are generally up more due to the natural gas orientation of the region, and the geology is seen as more attractive, and more companies assess the economics of exploration as attractive."

Those firms planning increases in E&P spending in Canada in 2003 include Burlington Resources, up 14% to $547 million; Canadian Natural Resources Ltd., up 39% to $1.4 billion; EnCana, up 12% to $1.8 billion; ExxonMobil, up 5% to $725 million; Nexen, up 20% to $350 million; Penn West Petroleum Ltd., up 45% to $204 million; Petro-Canada, up 15% to $1.5 billion; and Shell Canada Ltd., up 5% to $310 million.

Those planning declines included ConocoPhillips, down 8% to $165 million; Forest Oil Corp., down 71% to $35 million; Murphy Oil Co., down 11% to $200 million; Paramount Resources Ltd., down 19% to $107 million; Unocal, down 16% to $142 million; and Vintage Petroleum Inc., down 18% to $50 million.

Related Articles

ConocoPhillips slashes 2015 capital budget

12/08/2014 ConocoPhillips has elected to reduce its 2015 capital budget to $13.5 billion, down 20% compared with this year’s budget. The news comes on the hee...

BLM issues final SEIS for Greater Mooses Tooth project in NPR-A

10/30/2014 The US Bureau of Land Management released its final supplemental environmental impact statement for the proposed Greater Mooses Tooth (GMT1) oil an...

Western gulf lease sale attracts $110 million in high bids

08/20/2014 Gulf of Mexico western planning area Lease Sale 238 drew 93 bids from 14 companies over 81 blocks covering 433,823 acres, totaling $109,951,644 in ...

ConocoPhillips, Enap sign deal to study unconventional oil, gas in Chile

08/06/2014 ConocoPhillips and Chile’s state oil company Empresa Nacional del Petroleo (Enap) have signed a technical agreement to jointly conduct geological, ...

Oando completes purchase of Nigeria assets from ConocoPhillips

07/30/2014 Oando Energy Resources (OER), a Calgary-based subsidiary of Oando PLC, has completed its acquisition of the Nigeria upstream business of ConocoPhil...

ConocoPhillips, Suncor join Shell in deepwater exploration off Nova Scotia

06/11/2014

ConocoPhillips and Suncor Energy Inc. are joining Shell Canada as partners in exploring the deepwater Shelburne basin off Nova Scotia.

ConocoPhillips raises estimates on Eagle Ford recoverable resources, production

04/11/2014 ConocoPhillips has increased its estimated resource base in the Eagle Ford play to 2.5 billion bbl of oil in place from 1.8 billion bbl, as well as...

ConocoPhillips reports higher 2013 earnings

02/10/2014 ConocoPhillips reported full-year earnings of $9.2 billion in 2013, an increase from the $8.4 billion totaled in 2012, which included $1.2 billion ...

ConocoPhillips reports higher 2013 earnings, expects higher production in 2014

01/31/2014 ConocoPhillips reported full-year earnings of $9.2 billion in 2013, an increase from the $8.4 billion totaled in 2012, which included $1.2 billion ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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