Oil, gas spending seen rising in 2011: Barclays

(BestGrowthStock) – Global spending on oil and gas exploration and production is set to rise by 11 percent to $490 billion in 2011, led by increased expenditure in Latin America, the Middle East/North Africa and Southeast Asia, according to a survey conducted by analysts at Barclays Capital.

Exploration and production (E&P) spending in the United States is expected to rise by 8.1 percent to $93.6 billion, while Canadian budgets are estimated to increase by 4.8 percent to $32.6 billion, according to the survey of 402 oil and gas companies.

“Given our strong growth expectations for the oil service and drilling industry relative to the global economy over the next two to three years, we believe the oil service stocks should command a considerable premium to the market,” Barclays’ analysts said.

They raised their share-price targets by an average of 16 percent on several U.S. oil services and drilling companies, including FMC Technologies Inc (FTI.N: ), National Oilwell Varco Inc (NOV.N: ) and Dresser-Rand Group Inc (DRC.N: ).

The vast majority of E&P spending in the United States is expected to be directed toward conventional oil plays, liquid rich reservoirs and oil shales, while spending in traditional dry gas drilling is expected to decline, the survey said.

Outside North America, E&P spending is seen increasing by 12 percent next year to $363.3 billion, helped largely by higher capital spending from the “supermajors” and select national oil companies, according to Barclays’ analysts.

Spending on exploration and production is heavily dependent on oil and gas prices, and is the key driver of revenue for oilfield services companies such as Schlumberger Ltd (SLB.N: ), Halliburton Co (HAL.N: ) and Baker Hughes Inc (BHI.N: ).

According to Barclays’ analysts, ConocoPhillips (COP.N: ), Hess Corp (HES.N: ), Pioneer Natural Resources Co (PXD.N: ), EOG Resources Inc (EOG.N: ) and Noble Energy Inc (NBL.N: ) are among the larger U.S. companies that will significantly increase 2011 E&P budgets.

The analysts, however, expect Encana Corp (ECA.TO: ), Southwestern Energy Co (SWN.N: ), Devon Energy Corp (DVN.N: ), Williams Cos Inc (WMB.N: ) and Range Resources Corp (RRC.N: ) to reduce their E&P budgets for 2011.

For the 2011 survey, companies were basing their spending projections on a U.S. crude oil price of $77.32 per barrel, up from the $73.56 level that they used for the mid-year survey.

For more details about Barclays’ price target changes on U.S. oil services and drilling companies, please double click on [ID:nWNAB9066] [ID:nWNAB9074]

(Reporting by Tenzin Pema in Bangalore; Editing by Anne Pallivathuckal)

Oil, gas spending seen rising in 2011: Barclays