SURVEY FINDS PRODUCERS PLAN TO SPEND MORE THAN ORIGINALLY PLANNED IN 2000 
   
 06/19/2000 
 Petroleum Finance Week 
 (c) 2000 Phillips Business Information, Inc. 

 Oil and gas producers plan to increase their worldwide exploration and 
production expenditures by more than they anticipated
 at the beginning of the year, Lehman Brothers Inc. found in a mid-year 
update of its annual E&P survey. "The 326 companies
 we surveyed are planning on an 18.2 percent increase, versus a 10.2 percent 
rise budgeted in December," said James D.
 Crandell, who follows oil services and drilling for the New York investment 
banker.

 He emphasized that the gain by the 326 producers in Lehman's survey reflects 
increases in budgets for 2000 and not
 underspending of budgets during 1999. "Among the companies that were 
included in our December 1999 and May 2000
 surveys, global spending actually came in slightly above what was estimated 
to have been spent during 1999 in December. It
 also indicates that nearly $6 billion has been added to 2000 worldwide 
exploration budgets since December," Crandell said.

 The survey's respondents said that they planned to increase U.S. E&P 
expenditures by 17.6 percent, up from 15.9 percent
 earlier in the year. Crandell said that the greater increase was driven 
almost entirely by independent producers. "In our survey,
 227 independents indicated E&P spending growth in 2000 of 26.1 percent 
versus a 22.9 percent increase budgeted for the
 year in December," he indicated. "Some 40 percent of the independents we 
surveyed have increased their U.S. E&P budgets,
 while about 23 percent plan on spending less than what they indicated last 
December. Higher natural gas prices and increased
 cash flow are the main drivers behind this."

 Crandell said that Anadarko Petroleum Corp. (NYSE: APC), Apache Corp. (NYSE: 
APA), BHP Petroleum, H.S. Resources Inc.
 (NYSE: HSE), McMoRan Exploration Co. (NYSE: RAN), MDU Resources Group Inc. 
(NYSE: MDU), Mitchell Energy and
 Development Corp. (NYSE: MND.A and MND.B), Santa Fe Snyder Corp. (NYSE: 
SFS), Stone Energy Corp. (NYSE: SGY) and
 Titan Exploration Inc. - now Pure Resources Inc. (NYSE: PRS) - were among 
the larger independents to make the most
 significant upward revisions. The ones that significantly reduced planned 
U.S. E&P outlays for the year included Barrett
 Resources Corp. (NYSE: BRR), Belco Oil and Gas Corp. (NYSE: BOG), Burlington 
Resources Inc. (NYSE: BR), Coastal Corp.
 (NYSE: CGP), Forcenergy Inc. (NYSE: FEN), Houston Exploration Co. (NYSE: 
HEX), Kerr-McGee Corp. (NYSE: KMG), Mariner
 Energy Corp. and Williams Production Co.

 The survey found that major oil companies plan about the same percentage 
gain in their 2000 U.S. E&P expenditures (8.8
 percent) at midyear as they did at the beginning of the year (8.4 percent). 
Among the 14 companies in this category, 31
 percent made meaningful increases in their 2000 E&P spending estimates 
during the first six months, including Amerada Hess
 Corp. (NYSE: AHC), Conoco Inc. (NYSE: COC.A and COC.B), Occidental Petroleum 
Corp. (NYSE: OXY)and Total Fina Elf S.A.
 (NYSE: TOT). Another 19 percent - including ENI SpA (NYSE: E), Royal 
Dutch/Shell (NYSE: RDP and STT) and Texaco Inc.
 (NYSE: TX) - scaled back their domestic spending estimates, while the 
remaining 50 percent of the majors in the survey
 remained the same.

 'The increase in Canada... is nothing short of staggering...'

 "The increase in Canada indicated by the 85 companies in our survey is 
nothing short of staggering," Crandell continued. Of
 the 85 companies that he contacted, 44.7 percent budgeted higher 
expenditures for 2000 than for 1999. "Compared with
 December, 41 percent of them have increased their estimated spending in 2000 
by more than 10 percent, while 20 percent
 have reduced it by more than 10 percent. The remaining 39 percent have kept 
it within 10 percent of what was originally
 estimated," Crandell said. Talisman Energy Inc. (NYSE: TLM) led the group 
with a huge increase, followed by Anderson
 Exploration Ltd. (TSE: AXL), Gulf Canada Resources Ltd. (NYSE: GOU), Murphy 
Oil Corp. (NYSE: MUR), Pan Canadian
 Petroleum Ltd. (TSE: PCP) and Shell Canada Ltd. (TSE: SHC). Like their U.S. 
counterparts, producers above the border raised
 their 2000 E&P budgets in response to higher gas prices and increased cash 
flow, according to the Lehman analyst.

 He said that foreign upstream budgets were an area of surprise: "The 14.9 
percent gain indicated by the 99 oil and gas
 companies that have operations outside the United States and Canada was well 
above the 5.7 percent increase for 2000
 estimated last December. As in other geographies, there were more companies 
that increased budgets than decreased them."
 Overall, Crandell said that 33 percent of the surveyed companies raised 
their 2000 E&P budgets by more than 10 percent, 43
 estimated expenditures in roughly the same range and 24 percent indicated 
that they would spend less than originally planned.
 He said that the larger increases were driven by some big companies which 
materially increased their budgets, including
 Texaco, Petroleos Brasileiros S.A., Petroleos Mexicanos S.A. and Repsol YPF 
S.A. (NYSE: REP) among the multinationals and
 Amerada Hess, Apache, Premier Oil Plc. and Woodside Energy among mid-sized 
companies.

 Crandell noted that while respondents' average price assumptions rose during 
2000's first six months (to $22.04 from $19.25
 per barrel of crude oil and to $2.58 from $2.38 per thousand cubic feet of 
natural gas), they still trail current prices and what
 Lehman Brothers estimates for the year ($28 per barrel of crude and $3.30 
per Mcf of gas). "This suggests a stronger second
 half than expected, should companies raise budgets further to reflect the 
higher prices," he said.

 - Nick Snow in Washington
---------------------- Forwarded by John Peyton/HOU/ECT on 06/19/2000 07:36 
PM ---------------------------


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SURVEY FINDS PRODUCERS PLAN TO SPEND MORE THAN ORIGINALLY PLANNED IN
2000

  Oil and gas producers plan to increase their worldwide exploration and
production expenditures by more than they anticipated at the beginning
of the
year, Lehman Brothers Inc. found in a mid-year update of its annual E&P
survey. "The 326 companies we ...

Published by: Petroleum Finance Week
Date: 06/19/2000
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Folder Name: Energy: Oil Drilling

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