One US major and two Canadian exploration and production companies have recently reported their preliminary capital spending plans for 2008.
These companies include:
- Chevron Corp. plans a $22.9 billion capital and exploratory spending program for 2008, a 15% increase from estimated outlays of $20 billion in 2007.
- EnCana Corp. reported it has budgeted $6.9 billion for its 2008 capital spending plan, which is up about 13% from 2007.
- Nexen Inc. has approved a 2008 capital investment program of $2.4 billion, about $1.2 billion less than its 2007 program.
Chevron’s spending plans
Anticipated cash expenditures by Chevron and consolidated companies next year will be $20.3 billion because the budget includes $2.6 billion of expenditures by affiliates.
Dave O’Reilly, Chevron chairman and chief executive officer, said 75% of the 2008 budget is for upstream projects worldwide and 20% is dedicated to downstream businesses.
“Much of our 2008 spending continues to be on large, multiyear projects,” O’Reilly said. Much of the upstream budget is allocated to development, including projects in deepwater Gulf of Mexico and western Africa.
George Kirkland, Chevron’s executive vice-president of upstream and gas, said, “Production startups of major projects in 2008 are expected to include Blind Faith in the Gulf of Mexico and Agbami offshore Nigeria.” He also anticipates significant production increases at Kazakhstan’s Tengiz field during 2008.
EnCana’s spending plans
EnCana said its 2008 capital investment plan targets US natural gas growth, as well as longer lead time projects such as Canadian oilsands, expanded downstream refining capacity, and the advancement of the Deep Panuke natural gas project off Nova Scotia. EnCana expects to grow 2008 gas production by about 7%, while oil and natural gas liquids production is expected to decrease about 8%, mostly due to natural decline in mature properties. EnCana’s total production is expected to increase about 5% to about 4.6 bcfd in 2008.
“With the geological and economic success in our unconventional gas fields in Wyoming and Texas, we are substantially increasing investment in our US natural gas production, which is expected to grow by about 25% this year. Our gas growth is largely driven by our leading-return projects—Jonah in Wyoming and the Amoruso field in East Texas, where a planned investment increase of about 65%, to more than $1 billion, is expected to boost production more than 45%,” said Randy Eresman, EnCana’s president and chief executive officer.
EnCana’s integrated oilsands production is expected to grow about 25% in 2008 to about 34,000 b/d. The company plans to double its investment in integrated oilsands to about $1.2 billion in 2008, split about evenly between growing upstream production and expanding downstream heavy oil processing capacity.
In addition, the planned Alberta royalty increases starting in 2009 have significantly diminished returns for deep gas well drilling and new and emerging resource plays. Compared to EnCana’s preliminary capital investment plan for 2008, increases in Alberta royalties have resulted in a reduction of about $500 million of EnCana’s Alberta investment next year.
EnCana’s Alberta drilling for shallow gas, deep gas, coalbed methane, and its delineation drilling of new oilsands plays will be lower than in previous years. Investment in British Columbia in 2008 is expected to be about the same as in 2007. In Canada, excluding integrated oilsands, about $3 billion is planned for upstream investment, about 10% lower than in 2007.
Nexen’s spending plans
Nexen said the decrease in spending for 2008 vs. 2007 reflects reduced investment in several of the company’s major development projects, including its coalbed methane operations in Alberta, due to uncertainty surrounding proposed changes to Alberta’s royalty regime.
Nexen said its 2008 capital spending will focus on value-adding projects, growing net production by about 8-10%, and generating $2.9 billion in cash flow next year, which compares to its expected cash flow of about $3.4 billion for 2007. About 29% of the capital budget will be allocated to major development projects. This will allow Nexen to bring Long Lake Phase 1 and Ettrick oil field in the North Sea on stream in 2008 as well as progress Longhorn in the Gulf of Mexico and CBM at Fort Assiniboine in Alberta.
About 17% is earmarked for early-stage development projects expected to contribute production and cash flow growth beyond 2008. These include future phases of oil sands in the Athabasca region, Block OPL-222 off West Africa, and its Knotty Head and Golden Eagle discoveries in the Gulf of Mexico and North Sea, respectively.
About 25% will be spent on exploration in North Sea and Gulf of Mexico growth areas and on shale gas in northeast British Columbia. Another 25% it allocated toward existing producing assets.