According to 41% of participants in a recent survey by Houston-based accounting, tax and business advisory firm Grant Thornton LLP, the average price of gas for 2007 must be $8.43 per thousand cubic feet (Mcf) to justify an increase in U.S. drilling activity of more than 20%. More than half indicated that gas production would fall if prices were less than $5 per Mcf this year. About 10% expect gas prices to be high enough to support an increase in drilling.

Meanwhile, almost 93% say that the average price per barrel of West Texas Intermediate crude must be greater than $60 to justify an increase in U.S. drilling activity this year. Almost 60% expect oil drilling to slow down if prices drop to $40 or less per barrel.

Reed Wood, Grant Thornton partner in charge of the firm's energy practice, says, "The findings show an industry that is generally optimistic and strong, but somewhat apprehensive about projecting increases in capital spending and drilling activities when the prices of gas and oil remain uncertain for the most part."

Also, 65% anticipate increases in domestic capex in 2007; more than half of the respondents plan to focus on both oil and gas in 2007, and not primarily gas as in 2006; 79% expect a need for more capital in the next five years; about 50% plan to spend more on environmental remediation or studies compared with current levels; and, respondents anticipate a rise in M&A and restructurings in 2008.

More than 80 upstream U.S. energy companies participated in the survey.

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