By OGJ editors
HOUSTON, Sept. 14 -- Oil and natural gas companies' spending in the US and Canada continues to rise, but the growth rate of that spending appears to be slowing, said the monthly PatchWork Survey results released by UBS Securities LLC.
"The spending index took a sharp step backward this month from last month's record level, but still remains at a high level of 44," UBS analyst James H. Stone said in a Sept. 14 report. The August index was 65.
UBS's survey uses an index ranging from -100 to 100. Positive numbers indicate that an increase in activity or pricing is expected in 60 days. A negative number indicates a decrease in activity or pricing is expected during the same timeframe. A value of zero or close to it indicates that no change is expected in 60 days.
"We still expect that spending should continue to increase as operators attempt to take advantage of continued high commodity prices. In fact, several operators have announced spending increases in the last several weeks," he said.
Drilling plans
The drilling index for the US dropped to 42 from last month's record level of 61.
"After three successive months of record readings, the drop-off is a bit surprising to us, particularly the magnitude of the drop. However, we have seen this before in the survey, only to see a rebound in the next month," he said.
Only 11% of the respondents said that they expect drilling to decline in the next 60 days while 53% expect drilling to increase and 36% expect no change.
Meanwhile, the number of drilling permits issued has shown some weakening in the last 4 weeks, but the permit levels remain strong enough to support the current high level of drilling activity, he said.
"Another issue that could hurt the rate of increase in activity is the availability of rigs and crews," he noted.
Workover, seismic
The workover index for the US and Canada declined slightly to 36 from 40 last month.
"However, the index remains at a level that is strong enough to sustain the current level of activity as the majority of respondents expect flat workover activity during the next couple of months," he said.
The seismic acquisition index rose slightly in September, but it continues to trail all other activity indices, he said.
"The level is stable and showing improvement, which is reason for mild optimism regarding seismic activity improvements. The index stands at 16, and over two-thirds of operators are expecting no change in activity," he said.