Barclays: Global E&P spending growth revised to 9% for 2017

Global exploration and production spending will rise 9% in 2017 compared with spending in 2016, according to the latest update of Barclays’ E&P spending survey. This compares with 7% indicated in the January survey (OGJ Online, Jan. 9, 2017).

The upward revision reflects higher upstream spending budgets released or revised by companies over the last 2 months, especially an uptick in spending expectations for North America.

Barclays since January has revised estimates for 70 companies representing 88% of North America spend for 2016 from budget announcements mostly disclosed as part of yearend earnings. Collectively, those companies now expect North America upstream spending in 2017 to increase 32% year-over-year compared with the overall 27% increase expected 2 months ago.

US international oil companies are also expected to increase North America spending by 4% year-over-year vs. flat spending in January, driven primarily by increased spending from BP PLC and ExxonMobil Corp.

Since the beginning of the year, at least eight companies have announced acquisitions in the Permian basin totaling $16 billion. The largest of these was ExxonMobil’s 250,000-acre acquisition from companies owned by the Bass family of Fort Worth, Tex., with an estimated 3.4 billion boe, doubling ExxonMobil’s Permian basin resource to 6 billion boe.

However, near-term risk to the oil price, due to a combination of increasing US production, crude inventories continuing to build, and the big decisions facing the Organization of Petroleum Exporting Countries in May, adds downside risk to E&P budgets, which are a function of cash flow, Barclays noted in its outlook.

“If oil prices stay below $50/bbl, E&Ps are likely to defer some growth by a quarter or two in North America, with little change to our international figures,” Barclays said.

International spending is now expected to increase 3% in 2017 compared with the 2% rise that was anticipated in January’s update.