E&P companies have higher oil and gas price expectations for 2000, compared with last year, and they also plan increased capital spending, according to Arthur Andersen's 1999-2000 U.S. Oil and Gas Industry Outlook Survey. Executives with nearly 100 oil companies participated in the annual survey. Results were released at the annual Arthur Andersen energy symposium in Houston last month. The executives' outlook for West Texas Intermediate is $20 a barrel in 2000, on average, through 2003, increasing to $20.80 a barrel in 2004. W. Mark Low, an Arthur Andersen partner from Dallas, noted that the respondents' outlook was a marked improvement from a year earlier when "some people were predicting prices would stay at $12 forever." Survey respondents are more optimistic about gas prices than they were in late 1998, when they predicted Henry Hub prices of an average $2.30 per thousand cubic feet in 2000, rising to $2.49 per Mcf by 2003. Now, they expect median spot prices of $2.50 per Mcf in 2000 through 2002, rising to $2.60 in 2003 and $2.70 by 2004. When asked what the average price of oil needs to be, to increase significantly domestic oil reserves, the $20 figure was given by 43% of executives representing major oils; 60%, large independents; and 41%, other independents. Arthur Andersen defined large independents as those with more than 200 million equivalent barrels of proved reserves at year-end 1998. The seven majors participating in the survey were Chevron Corp., Conoco Inc., Exxon Mobil Corp., Marathon Oil, Phillips Petroleum Co., Texaco Inc. and TotalFina SA. Thirteen large independents participated and 69 smaller independents. Victor A. Burk, Arthur Andersen's managing director of energy industry services, said majors and independents have different outlooks when it comes to capital spending plans. "While the independents rank the U.S. and Canada as the most attractive areas for exploration and development investment, the majors who responded to our survey rated West Africa and the Middle East ahead of the United States," Burk said. "The majors are focusing their domestic exploration and development activities in a few select areas, such as the deepwater Gulf of Mexico." The survey showed 64% of all respondents plan increased domestic capital spending for exploration in 2000, compared with 1999. Increased domestic capital spending was planned by 29% of the majors, 77% of the large independents and 66% of the other independents. As for nondomestic exploration spending, 29% of all respondents plan to spend more in 2000 than in 1999: 43% of the majors, 54% of the large independents and 20% of the other independents planned higher foreign exploration spending. -Paula Dittrick

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