Two year-end E&P spending surveys predict worldwide upstream spending will grow about 4% in 2004. Approximate 6% growth in international expenditures is expected to offset relatively unchanged U.S. and Canadian spending. One survey, by Lehman Brothers, was of 335 producers. They plan to boost worldwide spending to $144.3 billion in 2004 from $138.7 billion in 2003, an increase of 4%. Their U.S. E&P spending forecast is down 0.1%, with most of the decline due to cutbacks by the major oils whose U.S. spending is expected to fall 3.9%. Spending in the U.S. by independents is forecast to grow 2.5%. The growth in U.S. spending by independents will be driven by smaller E&P companies, according to Lehman. Independents that spend less than $50 million a year expect to increase their spending 19% on average, while companies with budgets greater than $50 million will bump up spending only 1.4% in the U.S. Larger independents expecting to boost their U.S. spending significantly include Canada's EnCana, up 32% from 2003; Williams, 98%; Westport Resources, 28%; Canada's Nexen, 34%; Noble Energy, 21%; Unocal, 13%; and Burlington Resources, 10%. Those expecting to spend much less in the U.S. in 2004 are Anadarko, 7% less; El Paso, 21% less; Devon Energy, 17% less; and Kerr-McGee, 27% less. Majors cutting back in the U.S. are ExxonMobil, which is budgeting 5% less spending than in 2003; BP, 2% less; Royal Dutch/Shell, 15% less; Occidental, 10% less; and Murphy Oil, 37% less. The forecast for Canada is similar: a 0.2% decline in 2004, while many majors and large independents cut back and small independents up their spending. Decreased spending is expected from Anadarko, at 11% less; Baytex Energy, 36% less; BP, 17% less; Bonavista Petroleum, 12% less; ConocoPhillips, 9% less; and Petro-Canada, 15% less. Companies expecting to increase their E&P spending in Canada include ARC Resources, up 17%; Burlington Resources, 10%; Canadian Natural Resources, 5%; EnCana, 5%; Paramount Resources, 20%; Penn West Petroleum, 19%; and Shell Canada, 14%. Spending abroad International expenditures are the bright spot. The 92 companies in the survey with non-North American spending plans reported a 6.1% increase in their budgets, led by Latin American and European companies. The expected increase in international budgets comes despite Lehman's forecast that spending by three of the five super-majors will be down, and that spending by some of the companies that have been primary drivers of international growth in the past-Mexico's Pemex, Russia's Yukos and Lukoil, and Brazil's Petrobras-will either be flat with 2003 or decline. Large companies forecasting flat or reduced international E&P spending are Petrobras (flat), Royal Dutch/Shell (16% less), Yukos (13% less), Sibneft (12% less), Lukoil (3%), Italy's Eni (18% less), France's Total (4% less) and BP (3% less). The biggest gains among the large spenders in the Lehman survey are expected from Venezuela's PDVSA (129% more), Russia's Gazprom (53% more) Spain's Repsol YPF (29% more), and China's CNOOC (24% more). Among other gainers internationally are Australia's Woodside Petroleum (40% more), Apache (30% more), Norway's Norsk Hydro (11% more) and ChevronTexaco (10% more). Citigroup's survey The Citigroup survey followed close on the heels of the Lehman results. Citigroup, which polled 224 companies worldwide, predicts global E&P spending will grow 4.4% in 2004-to $148.9 billion, from $142.6 billion in 2003-thanks to a 6.4% boost in international budgets. Growth in spending in North America is expected to be a slim 0.7%. Citigroup also notes that it's not the super-majors that are planning big increases. Worldwide, companies with budgets under $500 million have an average of 17% larger E&P spending plans in 2004. Specifically, the largest planned increases for 2004 came from PDVSA, Pemex, Petrobras, Statoil, CNOOC and Yukos. The largest budget reductions are projected by Australia's BHP, Italy's Agip, BP, Kerr-McGee and Lukoil. Price forecasts James Crandell, an analyst for Lehman, says companies are placing more emphasis on returns and financial discipline. During 2003, producers revised their capex budgets upwards, while commodity prices gained strength. Yet, the level of increased capex was not similar to the growth in prices. "If you told me we'd have $30 oil and $5 gas, I'd have thought we'd have stronger growth than 10% [in 2003]." This year, the producers Lehman surveyed said their budgets are based on an average forecast of $25.29 for West Texas Intermediate, and $4.17 for Henry Hub gas. Citigroup reports it also saw its producers spend more in 2003 than forecast. The firm expects 2003 spending will have been up 9.4% from 2002, compared with producers' June 2003 forecast of 5.9% growth and their year-end 2002 forecast of 3.8% growth. "A record 69% of respondents overspent their original plans, and the overspend-to-underspend ratio compared with the midyear survey was also the highest we have recorded," says Geoff Kieburtz, an analyst for Citigroup. "The last year that came close to a similar result was 1997." The Citigroup survey participants report their 2004 capex budgets are based on $25.68 oil and $4.24 gas. -Jodi Wetuski