Five Oil and Gas Companies Raising Capital Spending for 2012
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While most investor's attention has been focused on the reductions in capital spending for oil and gas development in the onshore United States, several large oil and gas companies have raised capital budgets for 2012 as they pursue additional oil and liquids exploration and development opportunities across the globe.
Conoco Phillips (NYSE: COP) expects to spend $16 billion in capital during the year, up $1 billion from the previous guidance level. The company cited a delay in planned asset divestitures as well as additional investments in exploration activities across its global portfolio. These investments are important for future growth for the company and included conventional acreage in Angola, Bangladesh and the Gulf of Mexico and unconventional properties in the San Juan Basin, Western Canada, Australia, Permian Basin and the Niobrara.
WPX Energy (NYSE: WPX) increased the company’s capital spending by $200 million for 2012 and expects investments to total $1.4 billion for the year. The company plans to spend the extra funds on additional leasing opportunities for onshore plays that produce crude oil as it seeks to move away from its natural gas orientation.
WPX Energy will also spend more in the Bakken than originally anticipated as it tries to hold acreage and extend the aerial extent of its properties, while also testing the Three Forks formation. The company is also spending more on infrastructure to process and transport production from the Bakken.
Encana (NYSE: ECA) didn’t wait until the end of the second quarter of 2012 to increase capital spending for 2012 and added $600 million in spending in June 2012. The company is seeing excellent initial results from various new oil and liquid plays in North America and is planning extra development of these plays in the last half of the year. Encana will drill as many as 120 wells in these areas, which include the Tuscaloosa Marine Shale, Utica Shale and Mississippi Lime in the United States and the Duvernay and Clearwater formations in Canada.
One of the largest increases in capital spending in 2012 came from Hess Corporation (NYSE: HES), which will spend an extra $1.7 billion during the year. The company will put $1 billion of this extra capital towards its Bakken development program, where Hess is facing higher than expected drilling and completion costs due to a slower move towards a cheaper well design.
Hess is also spending additional funds on infrastructure to process and transport production in the area and has jiggered its development program towards higher working interest wells that will lead to a quicker conversion of its leases to held by production.
Continental Resources (NYSE: CLR) spent $827 million in the second quarter of 2012 with the majority of the funds allocated to the Bakken and Woodford Shale areas. The company indicated that it is “evaluating” its capital budget for the second half of the year as its cash flow benefits from higher oil prices over the last two months. Continental Resources is also facing higher working interest on wells in the company’s operated and non operated development programs.
Implication
The importance of these announcements is that they will help offset planned cutbacks by other oil and gas companies and buffer and downturn in the North America drilling cycle, which is currently threatened by recent weakness in commodity prices and concern on global economic growth.
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