By OGJ editors
HOUSTON, Dec. 9 -- Worldwide exploration and production expenditures are likely to rise "materially" in 2006, Lehman Bros. said in its annual E&P Spending Survey.
The report noted that the 325 companies surveyed plan to increase their worldwide E&P expenditures by 14.7% from 2005 levels to $238 billion in 2006.
In the US, E&P outlays by 247 of the surveyed companies are expected to rise by 14.9% to $57 billion. "All types of companies that operate in the domestic market—small-to-large independents and major oil companies—are budgeting significant increases in their 2006 budgets," the study said.
Outside North America, E&P spending also is forecast to increase 14.9% to $156 billion in 2006. This is up from $135 billion spent in 2005 by the 85 companies surveyed by Lehman Bros.
Canadian E&P spending is expected to rise 13.3% to $24.7 billion. "Larger E&P companies continue to drive spending growth in the country, with those companies that spend over $100 million expected to raise spending by 13.6% next year while those companies that spend less than $100 million are only budgeting increases of 7.1%," the survey noted.
Lehman Bros. found that the prices at which companies would cut drilling budgets are "well below current commodity prices." The survey found that companies would begin cutting budgets if oil prices fell below $45/bbl and if gas prices fell below $6-6.50/Mcf. E&P budgets for 2006 are based upon an average West Texas Intermediate oil price of $49.89/bbl and a gas price of $7.64/Mcf.
"We believe that budgeted spending gains will prove to be conservative due to oil and gas prices remaining high and drilling cost increases being above company forecasts," Lehman Bros. said.
