Cowen and Co. updated its Original E&P Spending Survey on July 7, indicating that global exploration and production (E&P) capex spending should increase by 3.3% this year to $682 billion. Cowen surveyed 467 companies.
The midyear update predicted that U.S. E&P spending would “grow faster than expected--poised to improve by 9.1% to $154 billion,” higher than the January forecast of 5.3%.
Many larger independents, including Apache Corp. (NYSE: APA), Anadarko Petroleum Corp. (NYSE: APC) and Concho Resources Inc. (NYSE: CXO) were given higher spending estimates. In fact, Cowen now predicts that companies spending more than $1 billion will increase their budgets by more than 8% as opposed to the original 4.6% prediction. Of the $1 billion-and-above group, only Chesapeake Energy Corp. (NYSE: CHK), Encana Corp. (NYSE: ECA, TO: ECA.TO) and Royal Dutch Shell Plc (NYSE: RDS-A, RDS-B) should lower their spending, Cowen now predicts.
The accelerated rate of domestic spending is due to a higher domestic rig count and high prices per barrel of oil (bbl). The rig count for the Permian Basin alone has grown 18%, to 553, and should “remain an area of focus” for this year’s second half, the report said. Currently at $104/bbl, oil prices are higher than both the year-to-date average of $98/bbl and the $92/bbl indicated in January.
Canadian spending should increase 7.2% to $39 billion, compared with the January forecast of 1.3%. Spending should be higher for companies “of all sizes” in Canada overall, and companies spending between $100 million and $1 billion should drive a year-over-year spending increase of 11%, compared with the original estimate of 1.7%.
In the midyear assessment, international spending predictions fell. The E&P spending estimate fell to 1.3%, down from January’s 3.8% estimate. Cowen said this reflects “lower spending in Latin America, reduced spending in Europe and reduced spending for Asia Pacific NOCs.”
Supermajors might restrict their international spending, Cowen said, noting ExxonMobil Corp.’s (NYSE: XOM) “lower forecast” compared with the last six months and many supermajors’ current implementation of “capital discipline” strategies.
North American companies might increase their international spending, though, by 4%, for a fresh $22.8 billion estimate compared with the last six-month estimate. The higher forecast mainly reflects Occidental Petroleum Corp.’s (NYSE: OXY) lower spending estimate from 2013, while for 2014, Anadarko and Noble Energy Inc. (NYSE: NBL) should “significantly increase” their international spending, Cowen said.
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