U.S. companies drawn by Canadian oil, gas potential Survey projects 11.9 percent hike in overall Canadian E&D spending Gary Park PNA Canadian Correspondent
Canada will set the pace globally for exploration and development spending this year, fueled by U.S. majors and independents shifting capital to both Canadian and international activities, says investment banker Friedman, Billings, Ramsey & Co. Inc.
The study by the Virginia-based firm projects U.S. E&D spending will edge up by a mere 0.2 percent to $32.08 billion, while Canadian spending will race ahead by 11.9 percent to $11.9 billion.
Operators are basing their plans on average West Texas Intermediate prices of $21.40 per barrel and Henry Hub gas prices of $3.26 per thousand cubic feet in the belief that current prices are artificially high and cannot be sustained.
Worldwide, report author Robert MacKenzie forecasts a 4.8 percent increase to $130.6 billion.
He said U.S. majors and independents are “attracted to the reserve potential in Canadian … heavy oil projects and in Western Canadian conventional gas plays.”
That trend has “developed over the last several years in response to the declining quality of new U.S. prospects,” MacKenzie said.
Biggest hike from independents Independent E&P companies are expected to hike their Canadian spending by 10.8 percent this year, while integrated companies are budgeting for a 5.5 percent increase.
The report excludes both spending on oil sands mining, because that has no influence on service activity, and on property acquisitions.
Friedman, Billings, Ramsey has estimated spending last year totaled $129.68 billion worldwide, up $4.5 billion from 2001, despite a sharp drop off in North America — with the United States dropping to $32.02 billion from $34.86 billion and Canada scaling back to $10.95 billion from $12.58 billion in 2001.
U.S. companies will finance 24 percent of global projects and Canadian firms will account for 9 percent.
To no-one’s surprise, EnCana Corp. will lead the way in Canada, with an E&D budget of $1.77 billion, $190 million ahead of 2002.
Next in line are Husky Energy Inc. $1.02 billion (up $48 million), Canadian Natural Resources Ltd. $868 million (up $325 million), Petro-Canada $798 million up $90 million), sister companies Imperial Oil Ltd. and ExxonMobil Canada, each at $600 million (Imperial unchanged and ExxonMobil up $100 million), Talisman Energy Inc. $563 million (up $14 million) and Burlington Resources Canada Energy Ltd. $550 million (up $50 million).
Of the other U.S.-based companies with major interests in Canada, Devon Energy Corp. has budgeted $500 million (down $10 million), Anadarko Petroleum Corp. $400 million (unchanged from 2002), Apache Corp. $340 million (up $65 million), Chevron Canada Resources $320 million (up $10 million), ConocoPhillips Canada Ltd. $300 million (down $50 million) and Murphy Oil Corp. $225 million (unchanged).
Without exception, the Canadian units of U.S. companies are heavily involved in gas plays in northern British Columbia and Alberta and most are stakeholders in the Arctic.
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