Company News: E&P firms’ budgets show increased spending plans

Feb. 27, 2006
Oil and gas companies continue to release their capital expenditure plans for the coming year.

Oil and gas companies continue to release their capital expenditure plans for the coming year. The budgets released by most of these firms show strong increases in spending compared with prior years. Some of the more recent announcements include:

• Marathon Oil Corp. approved a $3.4 billion budget for 2006, a 13% increase over the company’s actual 2005 spending of $3 billion.

• China National Offshore Oil Co. plans spend up to $3.06 billion this year to increase oil and natural gas output by 9%. That level of spending would be a 35% increase over 2005.

• W&T Offshore Inc. reported a $400 million capital expenditures budget for 2006, a 30% increase over its initial 2005 budget.

• Stone Energy Corp., Lafayette, La., has budgeted $360 million for capital expenditures in 2006, compared with 2005 spending of $380 million.

• Pan-Ocean Energy Corp. Ltd., St. Helier, Jersey, UK, has approved a $164 million exploration and development program for 2006 designed to double its 2005 production, which totaled 3.43 million bbl of oil. The company’s operations are in Gabon.

Marathon Oil

Marathon’s 2006 budget excludes $732 million associated with the company’s return to Libya. The company holds 16.33% interest in the Oasis group of producers, which signed an agreement with Libya in late December 2005 (OGJ, Jan. 23, 2006, p. 31).

Marathon’s worldwide exploration and exploitation budget is $588 million, of which 60% is for exploration, including the drilling of 19 wells. The exploration budget is $80 million higher than 2005 spending and reflects increased activity in Angola.

Exploitation activity, representing 40% of the overall budget, is focused on projects in or adjacent to Marathon’s producing US properties. Worldwide production capital spending is projected at $1.357 billion.

Key investments continue off Norway for Alvheim area oil fields and the Vilje oil discovery, formerly known as Klegg, Marathon said. Alvheim area fields are expected to come on stream in early 2007 at a forecast production rate of 85,000 boe/d (OGJ, Aug. 22, 2005, p. 36).

Refining, marketing, and transportation capital spending is expected to total $886 million during 2006. Refining investments, accounting for most of the downstream budget, are aimed at debottlenecking.


CNOOC aims to raise output to 168-170 million boe from an unaudited estimate of 153-157 million boe in 2005.

The Chinese firm said it would boost spending on exploration by more than 70% to $455 million, with about a third of that allocated for overseas projects. It did not disclose specific projects or regions where extra funding might be allocated.

However, CNOOC plans more than 60 exploration wells this year, mostly off China. Chief Financial Officer Yang Hua said CNOOC is confident of future deepwater development.

He said China’s deepwater areas have largely been untouched but some discoveries of natural gas have been made in shallower waters at the fringe of a deepwater area of the South China Sea.

CNOOC raised its budget for field development by 30% to $2.59 billion to help maintain its 7-11% long-term output growth target.

W&T Offshore

W&T Offshore’s 2006 budget outlines $198 million for exploration, $148 million for development, $39 million for plugged and abandoned expenses and seismic surveys, and $15 million for other major expenses.

Plans call for the drilling of 25 exploration wells and seven development wells. Of the anticipated exploration wells, 14 are expected to be conventional wells on the Outer Continental Shelf in the Gulf of Mexico, 4 will be deep shelf wells, and 7 will be deepwater wells.

Last year, the Houston independent successfully drilled 17 exploration wells.

Currently, W&T produces 190 MMcfd net of gas equivalent, 78% of its pre-Hurricane Katrina rate. The company estimates 38 MMcfd of gas equivalent of net shut-in production because of hurricane-related damages.

W&T anticipates that pre-Hurricane Katrina production levels will resume late in the second quarter.

Stone Energy

Of Stone Energy’s 2006 budget, 30% is to be spent on Gulf of Mexico shelf properties, 35% on operations in the Rocky Mountains and Williston basin, and the remainder primarily on deepwater and deep shelf exploration in the gulf.

Stone expects 2006 net production to average 200-230 MMcfd of natural gas equivalent, compared with an estimated 228 MMcfd last year. Stone is currently producing 200 MMcfd of gas equivalent and expects production for the quarter to reach as high as 215 MMcfd as key gulf fields come back on line and third party pipeline and processing facilities become more accessible following the 2005 hurricanes.

For 2006, Stone plans to increase production in the Rockies and Williston basin by more than 50% over its 2005 average of 24 MMcfd of gas equivalent.

It plans to drill 32 gross wells (20 net) in the Williston basin and 24 (9 net) at Pinedale and Jonah fields.

Stone’s drilling program through January included a successful exploratory well at its 100%-held Lexus Prospect on East Cameron Block 121 and seven development wells in the Williston basin and Pinedale Anticline. Stone is scheduled to drill two additional deep shelf prospects in the first quarter and will continue to evaluate exploration opportunities in Williston basin.

Stone estimates 2005 yearend proved reserves at 593 bcf of natural gas equivalent, down from 670 bcf on Sept. 30, 2005. For the year, production totaled 83 bcf and reserves additions, 88 bcf.

Stone had lowered its reserves by 171 bcf of gas equivalent from 2001 through the second quarter of 2005. This action has made the independent producer the subject of an US Securities and Exchange inquiry (OGJ, Dec. 12, 2005, p. 34).

Pan-Ocean Energy

Pan-Ocean’s proposed drilling program includes 1 offshore and 4 onshore exploration wells, 18 onshore and 2 offshore development wells, a gas injection well, and a water disposal well.

Pan-Ocean is drilling the first of 15 additional development wells in its onshore Tsiengui oil field and will install a central production facility at the field (OGJ Online, July 18, 2005).

Pan-Ocean also plans a pump station and a 29 km, 10-in. oil pipeline from the Tsiengui-Obangue-Awoun area to Coucal, expected to be commissioned by July (OGJ Online, Feb. 17, 2005).

Pan-Ocean and its Awoun permit partner, operator Shell Gabon SA, will install a 5,000 b/d early production facility on Koula (OGJ Online, Sept. 8, 2004).

The capex program also includes installation of a production platform at Avouma field on the Etame Marin permit off Gabon and the drilling of two Avouma development wells. Vaalco Energy is operator of Etame Marin (OGJ Online, May 17, 2005).