Energy companies are set to increase worldwide exploration and production spending for oil and natural gas this year, despite a sharp decline in oil prices this week to a 27-month low, according to a survey from Salomon Smith Barney.
Analysts Geoff Kieburtz and Mark Urness said in a report that their 16th annual survey of 202 oil and natural gas companies showed spending would rise 10.9 percent in 1998 after a record 18.7 percent rise in exploration and production spending in 1997.The survey, which covered 202 oil and gas companies, showed that worldwide exploration and production spending plans rose to $93.8 billion for 1998, from a projected $84.6 billion in 1997, despite ''moderate'' oil and natural gas price expectations.
''An unusually large number of respondents plan on spending more than cash flow, indicating that spending plans are increasingly based on a multiyear outlook rather than near-term conditions,'' Mr. Kieburtz and Mr. Urness wrote.
They said that although the average oil price assumption for projects had fallen to $19.23 a barrel for 1998, from $19.67 in 1997, projects were generally tested on a range of oil price scenarios, ''some ranging as low as $12.''
Monday, the benchmark West Texas Intermediate crude oil blend for February delivery fell, to close down 54 cents at $16.89 a barrel.
The analysts asked if Asia's economic slowdown and projected lower demand for oil had affected spending plans and the response was ''a resounding no.''
Most of the increase in spending will come outside the United States and Canada in the international arena. The 97 companies that responded said that spending there would rise 14.4 percent, to $54.8 million, compared with an expected 15.6 percent increase, to $47.9 billion, in 1997.
''Frontier territories are targeted for significant increases in spending in 1998, including deep-water West Africa and the former Soviet Union,'' Mr. Kieburtz and Mr. Urness wrote.
In the international arena, significant rises in spending are planned by Royal Dutch/Shell Group, Italy's AGIP, Malaysia's Petronas, Exxon Corp., Norway's Den Norske Stats Oljeselskap A/S, Amerada Hess Corp. and France's Elf Aquitaine.
Material reductions in spending are planned by Union Texas Petroleum Holdings Inc., Belgium's Petrofina SA, Austria's OMV AG and Argentina's YPF SA, ''generally due to project timing,'' the analysts said.
U.S. exploration and production spending by 139 majors and independents is projected to rise 6.1 percent, to $29 billion, with ''significant'' increases in spending planned by Exxon and Shell Oil Co. Independents include Union Pacific Resources Group Inc., Oryx Energy Co., Burlington Resources Inc., Louis Dreyfus Natural Gas Corp. and Equitable Resources Inc.