(Adds Iraq details)
June 18 Oil and gas companies will increase
exploration and production (E&P) spending by 6 percent to $712
billion this year, despite a slight pullback in spending by
industry majors, Barclays said.
Spending by major oil companies is expected to remain flat
this year, Barclays said in a report on Wednesday. The bank
earlier said it had expected spending to rise by nearly 3
The big oil companies, Exxon Mobil Corp, Chevron
Corp, Royal Dutch Shell Plc, Total SA
and BP Plc, are under pressure from investors to keep a
tight lid on spending after years of record spending on major
Barclays said it expected smaller, independent oil and gas
companies to drive spending growth in North America, where
capital budgets were expected to rise 8.4 percent this year,
higher than the 7.3 percent it forecast earlier.
There is potential for higher capital deployment in the
United States due to geopolitical risks in other oil-producing
countries, particularly Iraq, Barclays said.
"I think the first place they are going to put that money
into is North America," Barclays analyst James West told
reporters on a conference call.
If conditions in Iraq deteriorate further large Western oil
companies like Exxon Mobil Corp may contemplate
reallocating dollars to more stable regions like the United
States, he said.
Some oil companies are pulling staff from Iraq, fearing
violence could spread to major oilfields concentrated in the
south as Sunni militants push forward in northern Iraq.
Worries about oil exports from the key producer pushed up
the price of Brent crude to $114 a barrel on Wednesday
while West Texas Intermediate traded in New York was down
slightly at $106 a barrel.
The higher oil prices are expected to boost cash flow for
independent exploration and production companies, a factor that
may push North American spending even higher, said Barclays
analyst James West.
The bank's report, titled "Global 2014 E&P Spending Update,"
is based on a survey of more than 300 oil and gas companies last
Barclays said it also expected higher spending in Africa
and Asia this year, but lower capital budgets in Europe and
Latin America would limit the overall increase.
E&P companies are basing their spending budgets for the year
on oil prices at $101 per barrel for Brent and $91 per barrel
for West Texas Intermediate, and a benchmark U.S. natural gas
price of $4.12 per British thermal unit, well below current
prices, Barclays said.
(Reporting by Swetha Gopinath in Bangalore and Anna Driver in
Houston; Editing by Kirti Pandey and Sofina Mirza-Reid)