Global oil field spending to hit record $ 644 bn in 2013

LONDON: Oil field activity outside North America will drive a 7 percent increase in 2013 global energy exploration and production (E&P) spending to a record high of $ 644 billion, according to a Barclays survey.
While budgets will grow 9 percent in international markets to $ 460 billion, North America spending will "take a breather" after years of growth and be roughly flat in 2013, Barclays found in a survey of more than 300 oil and gas companies.
The busiest regions are expected to be Latin America, Australasia, and the Middle East, though the growth is spread wide. "Almost every country internationally with hydrocarbons to exploit is experiencing an increase in activity," Barlcays said.
The bank recommended buying oilfield services as a result, and said the big four diversified services companies — Schlumberger Ltd., Halliburton Co., Baker Hughes Inc. and Weatherford International — were trading below their historical levels on most measures.
Rowan Cos Inc. and Noble Corp looked the best value among offshore drillers, while Transocean represented a turnaround opportunity, the analysts said.
E&P companies are basing their 2013 plans on oil prices of $ 98 Brent, $ 85 West Texas Intermediate, and benchmark US natural gas prices of $ 3.47, the survey found. That indicated to the analysts that the projections may underestimate total spending.
They also found that North American E&P companies would begin paring their budgets if WTI fell by more than 25 percent and natural gas dropped more than 17 percent from current levels.
The persistent weakness in North American natural gas prices has already thrown the market for pressure pumping services badly out of balance, according to Peter Ragauss, chief financial officer at Baker Hughes.
"Although we're not planning for a meaningful improvement in natural gas prices, should prices improve next year, the entire North American market has the potential to shift overnight," he said yesterday at a Dahlman Rose conference in New York.
Yet despite constrained cash flows and a lack of growth in rig numbers, demand for production enhancement services would allow for some Baker Hughes revenue increases in its home market next year. "How can we squeeze a bit more juice from the rock?" he said.
Barclays found international spending by the oil majors in 2013 would rise 9 percent, including 17 percent growth in the drilling and exploration program at Chevron Corp. and increases of 5 percent or more for ConocoPhillips, Royal Dutch Shell Plc, Total and ExxonMobil Corp.
Over the next few days, Chevron is expected to release its full capital budget for next year, along with a new estimate for its huge Gorgon liquefied natural gas project in Western Australia.
Meanwhile, OPEC secretary general Abdullah Al-Badri said yesterday ahead of the oil exporting group's meeting in Vienna next week that global oil supplies are comfortable,.
"The market is comfortable as I see it at this time," he told Reuters on sidelines of United Nations climate talks in Doha.
OPEC is expected to stick with an output target of 30 million barrels per day (bpd) agreed a year ago when it meets on Dec. 12.
High stockpiles, slowing demand growth and a fragile world economy which would usually give members reason to trim output are counterbalanced by tensions in the Middle East which have kept Brent crude above $ 100 a barrel for most of 2012.
OPEC is pumping about 1 million bpd above the 30 million bpd output ceiling. Demand for its crude is set to drop next year by just over 400,000 bpd as the United States, enjoying a shale energy boom, and other non-member countries raise output.