Free Annual Reports
Exploration And Production Spending To Rise In 2011
Investors in the energy sector should expect capital spending by exploration and production companies to increase by 11% in 2011 over last year, as operators move to explore and develop various projects in North America and internationally.
IN PICTURES: 9 Simple Investing Ratios You Need To Know
The Survey
Barclays Capital conducts a survey of hundreds of companies in order to gauge the level of exploration and production capital spending for the upcoming year. This survey used to be conducted and published in previous years by Lehman Brothers.
Survey Says
Barclays Capital estimates that global spending by exploration and production companies will total $490 billion in 2011, an increase of 11% over the $442 billion spent in 2010. This expected increase has positive implications for oil service companies that sell products and services to the companies surveyed, and will help provide a nice tailwind in 2011.
Even better for 2011, the surveyed companies are using fairly reasonable prices for oil and natural gas on which to base the spending. Barclays Capital found that the average company is using $77.32 per barrel for oil and $4.27 per mcf for natural gas.
The Majors
Among the integrated oil companies, Chevron Corporation (NYSE:CVX) has released its capital budget for 2011. The company will spend $26 billion in 2011 on various projects, including $22.6 billion, or 85% in the upstream segment. This is a 20% increase over 2010 spending by the company.
Chevron Corporation will spread this upstream spending across the globe with 24%, or $5.4 billion in the United States, and the balance of $17.2 billion in the international space.
One of Chevron Corporation's largest international projects is the Gorgon Field off the coast of Australia, which includes natural gas development and Liquefied Natural Gas (LNG) facilities.
Chevron Corporation has a 47% interest in the Gorgon Field, and partners Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS-A) each have 25%. Chevron expects first production from Gorgon in 2014.
Independents
Some smaller independent oil and gas companies plan to keep spending flat in 2011 compared to 2010. Stone Energy (NYSE:SGY) plans to spend $425 million in 2011, approximately even with 2010, with much of this capital allocated to the Gulf of Mexico.
Goodrich Petroleum (NYSE:GDP) will reduce spending in 2011, and has allocated $225 million for the year, down about 12% from 2010. The company plans to shift spending from the Haynesville Shale to the oilier Eagle Ford Shale.
Canada
In Canada, Cenovus Energy (NYSE:CVE) expects to spend between $2.2 billion and $2.4 billion in capital in 2011, up slightly from 2010. The company is active in various oil sands plays in Canada.
Bottom Line
The exploration and production industry will increase spending by 11% in 2011, as the global economy continues its slow recovery from the recession of 2008. This spending is surely needed to meet future demand for oil and gas. (To learn more, see Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 9 Simple Investing Ratios You Need To Know
The Survey
Barclays Capital conducts a survey of hundreds of companies in order to gauge the level of exploration and production capital spending for the upcoming year. This survey used to be conducted and published in previous years by Lehman Brothers.
Survey Says
Barclays Capital estimates that global spending by exploration and production companies will total $490 billion in 2011, an increase of 11% over the $442 billion spent in 2010. This expected increase has positive implications for oil service companies that sell products and services to the companies surveyed, and will help provide a nice tailwind in 2011.
Even better for 2011, the surveyed companies are using fairly reasonable prices for oil and natural gas on which to base the spending. Barclays Capital found that the average company is using $77.32 per barrel for oil and $4.27 per mcf for natural gas.
The Majors
Among the integrated oil companies, Chevron Corporation (NYSE:CVX) has released its capital budget for 2011. The company will spend $26 billion in 2011 on various projects, including $22.6 billion, or 85% in the upstream segment. This is a 20% increase over 2010 spending by the company.
Chevron Corporation will spread this upstream spending across the globe with 24%, or $5.4 billion in the United States, and the balance of $17.2 billion in the international space.
One of Chevron Corporation's largest international projects is the Gorgon Field off the coast of Australia, which includes natural gas development and Liquefied Natural Gas (LNG) facilities.
Independents
Some smaller independent oil and gas companies plan to keep spending flat in 2011 compared to 2010. Stone Energy (NYSE:SGY) plans to spend $425 million in 2011, approximately even with 2010, with much of this capital allocated to the Gulf of Mexico.
Goodrich Petroleum (NYSE:GDP) will reduce spending in 2011, and has allocated $225 million for the year, down about 12% from 2010. The company plans to shift spending from the Haynesville Shale to the oilier Eagle Ford Shale.
Canada
In Canada, Cenovus Energy (NYSE:CVE) expects to spend between $2.2 billion and $2.4 billion in capital in 2011, up slightly from 2010. The company is active in various oil sands plays in Canada.
Bottom Line
The exploration and production industry will increase spending by 11% in 2011, as the global economy continues its slow recovery from the recession of 2008. This spending is surely needed to meet future demand for oil and gas. (To learn more, see Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
Free Annual Reports
