PatchWork survey: Increased oil and gas spending bodes well for service companies
By OGJ editors
HOUSTON, July 2 -- Sharp increases in oil and natural gas spending plans in the US and Canada reaffirm earlier signals that oil service fundamentals and activity levels should continue to improve, said UBS Warburg LLC in its latest monthly PatchWork Survey.
The survey compiles responses from oil and gas operating personnel, who are polled monthly as to their expectations of price and activity level.
"Positive expectations keep on rolling this month on the heels of last month's turnaround in activity," UBS said in its June survey. "(US and Canadian) operators followed through on their plans from the last survey, and if this survey follows the same path, activity and pricing levels should continue the positive trend."
Outside the US and Canada, activity indicators are still positive, although not as high as in May, said UBS analyst James Stone of New York. Product pricing expectations have surged in the US and Canada while staying relatively flat outside those two countries, he said.
"The results of this survey, along with those of prior surveys, further validates our belief that the second quarter will be the bottom of earnings in the current cycle.
In addition, the group should, in our view, show significant improvement in the latter half of 2002 through the beginning (of) 2003," Stone said of service companies.
Survey results
Survey respondents said their budgets are based on an average oil price of $20.83/bbl and an average gas price of $2.77/Mcf. Both numbers are higher than the numbers given in the May survey.
Only 6% of US and Canadian operators plan to reduce spending in the next 60 days, while 41% plan no change, and 53% plan an increase. Outside those two countries, 31% of operators plan an increase, 25% a decrease, and 44% plan no change.
In the US and Canada, drilling activity expectations are higher than in May. Of all respondents, 58% plan to increase drilling, 5% plan to decrease, and 38% do not plan any changes. In other countries, 47% of respondents plan no change, while 28% plan to increase, and 25% plan to decrease.
On the workover front, operators outside the US and Canada reversed 2 months of flat expectations with a mildly positive expectation. Within those two countries, workover activity is planned to increase even more so than was expected in May. Of US and Canadian respondents, 40% plan an increase, 3% plan a decrease, and 57% plan no change.