NEW YORK - Global spending on oil and gas exploration and production will rise 11 percent to $439 billion in 2010, reversing a drop in pending in 2009 as energy prices climb, according to a survey conducted by analysts at Barclays Capital.
The increase shown by the survey of 387 oil and gas producers follows the drop in spending of 15 percent in 2009 from the previous year, when oil prices reached a record high.
The projected spending increases for North American and international companies are surprisingly strong, Jim Crandell, oil services analyst with Barclays told investors on a conference call.
Spending on exploration and production is heavily dependent on oil and gas prices, and is the key driver of revenues for oilfield services companies such as Schlumberger Ltd, Halliburton Co and Baker Hughes Inc.
Oil prices had peaked above $147 a barrel in July 2008 before crashing to near $30 in December that year, forcing energy companies to shelve many new projects in an industry-wide round of belt-tightening.
For the 2010 survey, companies were basing their spending projections on a U.S. crude oil price of $70.16 per barrel, up from the $50.18 level that they used for the previous survey that was issued in June.
The average natural gas price for the 2010 budgets was $5.21 per thousand cubic feet, up from $4.68 in the middle of the year.
About 45 percent of the companies surveyed expect to spend a greater share of their capital expenditures on exploration in 2010, a positive for seismic and the major oil service companies, Barclays said.
Spending in the United States is expected to rise by 12 percent to $79 billion, driven by drilling for natural gas in shale plays. Canadian budgets will rise by 23 percent to $23 billion, lifted in part by the strengthening of the Canadian dollar, the survey said.
Still, the expected jump in drilling could pressure natural gas prices and possibly lead to another drop in the rig count as early as the second half of 2010, Barclays said.
We are not looking at these gains in a positive way from an investment standpoint, Crandell told investors.
Among larger companies in the United States, it expects Devon Energy to hike spending by 45 percent, Chesapeake Energy by 40 percent, EOG Resources by 21 percent and SandRidge Energy by 54 percent, according to the survey.
However, oil major ConocoPhillips' budget is likely to drop 23 percent while Royal Dutch Shell spending will likely fall 9 percent.
Exxon Mobil Corp, the world's largest publicly traded oil company, is expected to increase spending by 11 percent in 2010, according to the survey.
In Canada, Imperial Oil and Canadian Natural Resources are likely to see increase spending by 50 percent and 64 percent, respectively, while Shell and Conoco will both trim spending there.
INTERNATIONAL BUDGETS BIG
Outside North America, spending is expected to rise 10 percent to $337 billion, largely driven by national oil companies, the analysts said.
Barclays had estimated capital spending by international energy companies would rise only 5 percent in 2010, Crandell told investors.
Large Asian, Middle Eastern, Russian and African companies show some of the biggest budget increases, Barclays said.
For example in Russia, the survey showed a strong turnaround after the 30 percent decline in spending this year from 2008. Overall spending on exploration and production was expected to rise by 20 percent, with Gazprom spending up 14 percent, Lukoil up 25 percent and Rosneft up 22 percent.
Outside North America, spending on exploration and production in the Middle East and Africa would rise by 15 percent from 2009 levels, with the Nigerian National Petroleum Corp, Sonangol and Libya's National Oil Corp all showing significant increases, while Saudi Aramco and Qatar Petroleum Co spending was seen dropping modestly.
(Additional reporting by Anna Driver in Houston; editing by Lisa Von Ahn, Dave Zimmerman and Andre Grenon)