?The worldwide outlook for E&P spending has deteriorated in recent weeks. The global financial turmoil, falling oil demand, and lower oil and gas prices continue to take their toll on E&Ps and service companies.?Now, Barclays Capital analysts Tom Driscoll and Jim Crandell (formerly of Lehman Brothers) report that spending will fall as much as 25% in 2009.


They continue to conduct their annual E&P spending survey, which was to be released after press time, but preliminary results show a slow first-half 2009. They base this outlook on anecdotal information, announced budget cuts, and a recently lowered Barclays price forecast of $60 oil and $6.50 gas.


“We are now estimating flat spending internationally in 2009 and a 25% reduction in North America.?A recovery of 5% internationally and 10% in North America is forecast for 2010,” says Crandall.


Meanwhile, energy analyst John Olson of Sanders Morris Harris in Houston thinks the first half of 2009 will be slow and full of danger. He co-manages three energy hedge funds for the firm and predicted Enron’s demise as well as this banking meltdown.


The only way E&Ps can attract investors back at this point is to increase their dividends, he says, while stock buybacks do not help the average investor.


“The government will bail out some industries, but it won’t bail out any investors. I would urge you to stay away from the market for the next six weeks. There are too many crocodiles out there.”

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