U.S. E&P spending will grow by a modest 5.3% in 2014, a mild bounce back from 2013 when spending declined by about 3.2%. This is according to “The Original E&P Spending Survey,” led by Cowen and Co. managing director James Crandell.

“This gain understates the increase we are likely to see in wells drilled in 2014 due to the ongoing increases in rig efficiency,” says Crandell. Globally, the 466 companies surveyed estimated an increase of 4% in their E&P capital expenditures in 2014 compared with an increase of 4.7% in 2013.

Crandell said that while larger spenders such as Chesapeake Energy Corp., Encana Corp. and Hess Corp. are forecast to have declines, independents, especially those with exposure to the Permian Basin and, to a lesser extent, the Eagle Ford, are planning increases.

Double-digit increases are estimated for the companies spending less than $100 million, while the largest spenders gain only 4.6%.

E&P spending trends in Canada are similar to those in the US, but with smaller gains—1.3%— indicated for 2014.Solid gains from Suncor Energy Inc., Husky Energy Inc. and Canadian Natural Resources Ltd. were largely offset by declines coming from Apache Corp., Royal Dutch Shell Plc, Cenovus Energy Inc. and Light-stream Resources Ltd. The slight rise is driven in part by early stages of increasing drilling in the Horn River and Montney plays in anticipation of natural gas exports beginning in a few years, according to the survey.

Unlike U.S. operators, smaller Canadian companies in the aggregate are not anticipating an increase.

Internationally, E&P spending growth is estimated to be 3.8% in 2014, down from the 8% experienced in 2012 and 2013.

The growth should be driven by the Middle East (+14%), Europe (+14%) and Russia (+9%).International spending by large independents will be flat, while Africa and Asia-Pacific regions will see low-single-digit increases.

The Middle East is the fastest-growing international region. Saudi Aramco and Kuwait Petroleum Corp. are expected to have the strongest spending growth at 20% each.Abu Dhabi National Oil Co. (+3%) and Qatar Petroleum Co. (flat) are expected to see nominal growth, while both the South and North Oil of Iraq may be slightly lower.

What's expected for 2014? The 2000 to 2008 upcycle was characterized by four consecutive years of single-digit growth in international E&P spending, followed by four years of double-digit growth, Crandell says.

“If 2014 plays out as our survey indicates, it would represent the fifth year of an upcycle in international E&P spending,” he says.“However, instead of appearing poised to move into double-digit growth as last cycle's gain was, there is little to suggest this will happen in 2014 at the current time. Overall, the rate of growth appears as if it will slow down to less than half.”

The lull would be due to supermajors' plans to spend about $1 billion less in 2014 than in 2013. Smaller growth in the Asia-Pacific region is also expected as state-owned Chinese companies pull back. And Petrobras, the seventh-largest energy company in the world, is likely to experience a second consecutive year of reduced E&P spending.

North American companies as a whole are decreasing spending by about $100 million. But companies' plans fluctuate greatly. Among large spenders, Occidental Petroleum Corp. is spending $600 million less this year.Anadarko Petroleum Corp. is increasing its international budget by 80% with an additional $900 million.

Crandell launched the semi-annual Original E&P Spending Survey in 1982.

—Darren Barbee

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