Global spending on oil and gas exploration and production in 2012 is expected to increase 10% over last year, according to a recent survey by Barclays Capital. Despite the interest in onshore shale plays in North America, spending is expected to grow at a higher rate in the international area.

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Industry Survey
Barclays Capital's survey indicates that global spending on exploration and production spending will total $598 billion in 2012, up 10% from the estimated $544 billion spent in 2011. The survey results are derived from the activities of 350 exploration and production companies that operate across the world. Barclays Capital also estimated that spending in North America would increase by 8% over 2011, while spending on international oil and gas projects are expected to increase by 11%.

There may also be some upside to these spending estimates as the companies surveyed by Barclays Capital used an average price of $87 per barrel for crude grades in the United States and $98 per barrel for Brent crude. (For related reading, see What Determines Oil Prices?)

Company Budgets
The results of the Barclays Capital survey have been reinforced by recent budget announcements from public companies in the energy sector.

Chevron (NYSE:CVX) plans to spend $32.7 billion in capital in 2012, with $28.5 billion directed towards its upstream segment. In 2011, Chevron estimates that the company will spend $33 billion, including the $4.5 billion cost to purchase Atlas Energy.

Chevron plans major investments in North American and international properties, with $6.2 billion in exploration and production spending planned for North America and $22.3 billion on various international properties.

In 2012, Marathon Oil (NYSE:MRO) has budgeted $4.6 billion for its upstream segment, with 70% of the spending, or $3.35 billion, targeting the United States. The company plans to spend $1 billion on its international properties and $275 million on oil sands operations in Canada.

In 2011, Marathon Oil started the year as an integrated oil and gas company and spun off its refining operations at the end of the second quarter. The company spent $2.4 billion in upstream capital expenditures in the first nine months of 2011.

Conoco Phillips (NYSE:COP) announced a $15.5 billion capital budget for 2012, with $14 billion devoted to the exploration and production area. The company plans to spend 60% of these funds in North America. In 2011, the Conoco Phillips capital budget totaled $13.5 billion with 90%, or $12.15 billion allocated to the exploration and production area.

In March 2011, Exxon Mobil (NYSE:XOM) increased projected annual spending through 2015 to a range from $33 billion to $37 billion. The company has spent $26.7 billion through the first nine months of 2011.

The Bottom Line
The energy industry plans to increase spending on oil and gas exploration and production by at least 10% in 2012, with an excellent chance of an upside surprise from those levels. Investors might find that this positive trend will support earnings growth for oil service and drilling stocks next year. (For related reading, see A Guide To Investing In Oil Markets.)

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