Canadian cap-ex to fall 2.2% this year, Lehman Brothers survey predicts

Gary Park

Exploration and production spending will drop 2.2 percent in Canada this year to $14.02 billion (all figures in U.S. dollars), but the outlook for 2005 is healthy, with half of the firms surveyed planning to hike their budgets by 10 percent or more, a Lehman Brothers survey reports.

The New York-based investment bank said that if the spending target is achieved it will be $380 million above estimates at the end of 2003, but trail last year’s tally because of upward revisions to capital expenditures.

The mid-year survey by Lehman showed cap-ex by the 62 companies that also participated in the December 2003 survey increased by $383 million. Leading the additions were EnCana, up by $400 million, Imperial up by $180 million and Burlington Resources up by $110 million, but Penn West Petroleum slashed its target by $194 million.

Current budgets are based on average oil prices of $28.44 per barrel and $4.76 per thousand cubic feet of gas at the Henry Hub, compared with $25.29 and $4.17 in the year-end 2003 survey.

Of the leading Canadian forecasters, FirstEnergy Capital has boosted its West Texas Intermediate price for 2004 to $35.50 from $33 and predicted $32 for 2005 and $31 for 2006. Gas prices per million British thermal units are forecast by FirstEnergy to average $6.10 this year and $5.50 in 2005 and 2006.

Peters & Co. has also boosted its 2004 goals to $38 for WTI crude and $30 for 2005, while its Nymex gas prices are at $6 per million British thermal units in 2004 and $5 in 2005. Peters said WTI prices have already topped an average $37 in 2004, while Nymex gas in running close to $6.