Lehman: Global E&P spending to jump 20% in 2008

Worldwide exploration and production expenditures will increase 20% to $418 billion this year, according to a midyear survey of 398 companies by Lehman Bros.

By OGJ editors
HOUSTON, June 9 -- Worldwide exploration and production expenditures will increase 20% to $418 billion this year, according to a midyear survey of 398 companies by Lehman Bros.

The survey indicates acceleration in 2008 of spending plans in North America and elsewhere over plans indicated 6 months ago in the firm's previous survey.

E&P expenditures will rise 15% to $98 billion in the US, 11% to $27.5 billion in Canada, and 22% to $293 billion in all other countries. Lehman said this represents a record percentage increase over a 6-month period from December to June since the firm began conducting these surveys.

Lehman's December 2007 survey indicated growth of just 3.5% in the US, a 12% spending reduction in Canada, and a 16% rise in spending elsewhere.

The new survey indicates that operators added $35 billion to this year's budgets worldwide, with the largest boost to plans outside North America, an $18 billion increase in 2008 capital spending, said analyst James D. Crandell. Operators added $13 billion to their 2008 US budgets and $4 billion to budgets for spending in Canada.

In 2007, companies overspent their budgets by $8.5 billion, Crandell said. Outside North America, budgets were overspent by $5.5 billion, and US budgets were overspent by $3.5 billion, partially offset by $500 million of underspending of budgets in Canada.

This year's budget additions are being driven by higher commodity price expectations. The average price on which companies are basing their 2008 budgets has risen to $85.23/bbl for oil, up 25% from the level indicated in December, and $8.07/Mcf for US natural gas, up from $6.78/Mcf indicated in the December survey.

Of all the integrated oil companies, independents, and national oil companies Lehman surveyed, 70% anticipate that E&P spending growth will continue into 2009, with gains of at least 10% expected by 80% of these companies.

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