Companies increase capex for 2001
Gulf Canada Resources Ltd. in Calgary and Mitchell Energy & Development Corp. outside of Houston are among the latest oil and gas companies to announce new budgets for 2001. Phillips Petroleum Co. in Bartlesville, Okla., hiked its budget this week, while Unocal Corp. in El Segundo, Calif., expects a small increase in its spending.
Gulf Canada Resources Ltd. in Calgary and Mitchell Energy & Development Corp. outside of Houston were the latest oil and gas companies Thursday to announce budget increases for 2001.
Phillips Petroleum Co. in Bartlesville, Okla., also hiked its 2001 budget this week, while Unocal Corp. in El Segundo, Calif., said it expects to make a small increase in its budget.
Independent Mitchell Energy jumped its 2001 budget by 45% to $473 million, with $346 million allocated to exploration and production.
"This is our highest capital spending program since the early 1980s and reflects plans for accelerated development of the extensive inventory of undrilled locations in our core fields," said George P. Mitchell, chairman and CEO.
"At this spending level, we expect to add significant proved reserves during 2001 and increase production of both natural gas and natural gas liquids by at least 25% and 20%, respectively, versus this year's volumes. These targets exceed our previously announced growth expectations of 20% and 15%," he said.
The company has earmarked $263 million to drill 364 gross wells, primarily in Texas, up substantially from the estimated $159 million spent on 211 wells this year. Most of that will go into drilling operations in the Barnett shale, with 276 new wells scheduled on a 12-rig drilling program.
Another $40 million is budgeted to continue Mitchell Energy's aggressive rework program. Company officials plan 95 combined completion/refraction jobs in the Barnett and 85 recompletions in other fields.
Mitchell said the company plans to maintain exploration and development spending at that level "for at least the next 3 years" to increase gas production more than 20% compounded annually.
The company last week announced a $64 million project to construct a new 120 MMcfd processing train at its Bridgeport plant and a related 24-in., 49-mile residue gas sales pipeline (OGJ Online, Dec. 7, 2000).
Gulf Canada said Thursday its 2001 capital spending program is set at $1.2 billion (Can.), with 68% earmarked for a large inventory of development and exploitation projects and 32% to be spent on exploration.
Some 67% of the total budget will be spent in Western Canada, officials said. Another 20% is planned for Indonesia, with one-third earmarked for exploration and two-thirds for development of mostly gas resources. About 9% will go to The Netherlands, where gas production is projected to double over the next 2 years. The remaining 4% is mostly for frontier work in northern and eastern Canada and North Africa.
Gulf's total production is expected to grow in 2001 to 817 MMcfd of gas and 148,000 b/d of liquids. Almost 75% of that gas production is expected to be in North America.
Gulf Indonesia Resources Ltd., a 72% subsidiary of Gulf Canada, said Thursday that two-thirds of its $150 million (US) 2001 capital budget will be directed at development opportunities, with the other third to be spent on exploration and delineation drilling, primarily in South Sumatra.
That budget will be split evenly between natural gas and oil operations. Of the $75 million targeted for gas, 80% will go for development projects and 20% is earmarked for gas exploration and delineation. Of the $75 million directed at oil operations, 50% is for development and exploration in South Sumatra; 40% for an offshore oil exploration; and 10% for other capital requirements.
Phillips Petroleum on Tuesday approved a $2.5 billion capital budget for 2001. That's up from estimated spending of $2 billion this year, excluding the $6.7 billion to purchase Arco's Alaska assets.
Jim Mulva, Phillips' chairman and CEO, said the new budget "reflects the dramatic change our company has undergone in the past year. We are building on our legacy asset positions in Alaska and Norway, and moving forward with the development of our three international legacy projects�Hamaca, Bohai Bay, and Bayu-Undan."
Phillips plans to allocate 87% of its new budget to exploration and production. Another 10% will fund its refining, marketing, and transportation business, for which Phillips plans to pursue a 50:50 joint venture in late 2001 or 2002. The remaining 3% will be used for general corporate purposes.
Cash generated from continuing activities is expected to fund the capital program while providing for continued debt reduction, officials said.
Phillips' 2001 exploration and production budget is $2.2 billion, 30% more than estimated E&P expenditures of $1.7 billion this year.
The largest portion of next year's budget, 53%, will be spent domestically, with the Alaska business unit receiving 77% of that, or $914 million.
That will fund a study underway on the potential North Slope pipeline to the Lower 48 and construction of four Millennium Class tankers to transport North Slope crude. It also includes funds for development of the Alpine and Meltwater fields, and the satellite fields of both Prudhoe Bay and the Greater Kuparuk Area.
In the Lower 48, the company plans to develop coalbed methane projects in the San Juan, Powder River, and Uinta basins, as well as natural gas fields in north Louisiana.
Phillips budgeted $202 million for worldwide exploration activities, with 44% of that allocated domestically.
Internationally, the company plans to participate in exploration drilling activities in Kazakhstan, China, Oman, Nigeria, the UK, Denmark, and the Faroe Islands.
Phillips is directing $1 billion toward development of international projects. Those projects include the Hamaca heavy-oil development in the Orinoco Oil Belt of Venezuela; phases I and II of the company's PL 19-3 field in China's Bohai Bay; and the Bayu-Undan liquids recycle and regional gas pipeline projects in the Timor Sea.
Unocal said Tuesday it expects to raise its 2001 capital spending to $1.5-$1.6 billion, up slightly from an estimated $1.4 billion this year. The new budget estimate does not include significant acquisition expenditures.
"We will maintain discipline in our capital spending even in the face of extremely high commodity prices," said Roger C. Beach, Unocal chairman and chief executive officer. "The spending will add production in Southeast Asia and in the Gulf of Mexico shelf and the US Permian Basin (through our investment in Pure Resources, Inc.), which will allow us to take advantage of higher expected natural gas realizations," he said.
That spending forecast includes increased exploration drilling on Unocal's Gulf of Mexico and East Kalimantan, Indonesia, deepwater prospects, as well the company's first deepwater wells off Brazil and Gabon, said Charles R. Williamson, executive vice-president for international operations, who was elected Unocal's new CEO effective Jan. 1.
"Our spending plan, particularly in North America, is flexible enough that we can adjust it if commodity prices significantly change. If prices hold up at today's levels, we will allocate most of the excess cash flow to debt reduction," Williamson said.
Unocal's North American spending will total about $930 million. That includes some $130 million for deepwater exploration drilling in the gulf�more than double this year's spending level. The company expects to spend $530 million for exploration and development projects on the US gulf shelf and in the Permian Basin through its 65-percent owned Pure Resources Inc. subsidiary.
Unocal expects to spend $425 million next year on projects in Thailand and Indonesia. That includes development of the Pailin gas field and Yala oil field in the Gulf of Thailand, and the West Seno oil field in the Makassar Strait off East Kalimantan.
The company expects to spend about $50 million for exploration drilling on deepwater prospects off Brazil and Gabon (West Africa).
The planned 2001 budget does not include significant acquisition expenditures, officials said.