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WRAPUP 2-Oil, gas explorers spruce up 2010 spending plans
February 25, 2010 / 2:25 PM / 8 years ago

WRAPUP 2-Oil, gas explorers spruce up 2010 spending plans

* Plains, Berry, Continental raise 2010 capex outlooks

* Venoco, W&T see higher 2010 spending

* Berry, Continental raise 2010 production views

* Companies post Q4 profits

* Continental, W&T, Berry shares down (Adds analyst comments, conference call details)

By Arup Roychoudhury

BANGALORE, Feb 25 (Reuters) - Oil and natural gas exploration and production companies including Continental Resources Inc (CLR.N) and Plains Exploration and Production Co PXP.N forecast higher spending for 2010 as they bank on higher hydrocarbon prices and increased drilling activity.

Benchmark U.S. crude oil prices CLc1 averaged $76 per barrel in the fourth quarter, up from the third quarter and from a year ago. Natural gas prices have also recovered from their lows, although heavy supplies and weak demand continue to drag.

Continental Resources boosted its 2010 capital budget by 31 percent to $850 million, to accelerate drilling in its properties in the Bakken and Anadarko Woodford plays. [ID:nSGE61O0HK]

“We’re building a strong presence in the Anadarko Woodford, which has a strong oil component,” Continental CEO Harold Hamm said in a statement. “We believe the Anadarko Woodford is of the quality to be Continental’s next major building block.”

The company also raised its production growth outlook for 2010 to about 13 percent, up from its earlier view of 10 percent.

“Continental is a company that has been using their balance sheet to generate more growth,” UBS analyst Andrew Coleman told Reuters. “The market has been expecting more growth, and this is what Continental has done.”

Coleman backed Continental’s spending outlook and said its growth was more visible compared to Plains, as it was more focused on just two plays in North Dakota and Anadarko Woodford.

“With Plains, it is based on exploration kind of productivity,” he said. “It may lead to a very big success on a well, but it is difficult to sit back and predict what is going to happen.”

Plains Exploration raised its capital budget to $1.2 billion, from earlier plans of $900 million to $1.1 billion, and said spending would be directed to the company’s core assets in Haynesville shale, the Gulf of Mexico and the Gulf coast.

Plains said it was “increasing our average annual production growth target to 15 percent, up from 10 percent, through 2014. Our average annual reserve growth target is 20 percent over the next several years.”

Smaller peer Berry Petroleum Corp BRY.N also raised its spending outlook, while Venoco Inc VQ.N and W&T Offshore Inc (WTI.N) forecast higher budgets year-on-year. [ID:nSGE61O0HQ] [ID:nWNAB1704]

W&T PRODUCTION VIEW DISAPPOINTS

W&T Offshore, which raised spending by 63 percent over 2009, however, forecast lower oil and gas production in 2010, of 60 billion to 80 billion cubic feet equivalent (bcfe), compared with 94.8 bcfe it produced last year.

“W&T is a company that needs to transition from their period of hibernation to a period of substantially higher activity,” Natixis Bleichroeder analyst Curtis Trimble said.

In a conference call with analysts, the company said it expects to drill 10 wells in 2010, and it did not expect an immediate production build-up in the first and second quarters.

“We anticipate adding opportunities throughout the year,” W&T Chief Operation Officer Steve Schroeder said. “Three wells are exploring for oil and the other seven are targeting gas condensate reservoirs.”

Analyst Trimble said the company’s $450 million plan on 10 wells identified was a poor start to the year.

“It exhibits a strong liquidity position, but it does very little to reassure investors that the portfolio is robust and that production and reserve growth are real objectives of management,” Trimble said.

The companies posted strong fourth-quarter results, with W&T Offshore, Continental and Plains Exploration beating estimates, while Berry Petroleum came in line with Wall Street’s view. [ID:nWNAB1863] [ID:WNAB1786]

Shares of Continental were down 2 percent at $38.12 on Thursday afternoon while those of Berry were down 3 percent at $27.37, tracking the larger markets, as the Dow Jones U.S Exploration and Production Index .DJUSOS fell 7 points to 580.700 points.

Shares of W&T Offshore fell as much as 8 percent before paring gains to trade relatively flat at $8.90, while those of Plains were trading 2 percent up at $32.58. (Additional reporting by Krishna Das in Bangalore; Editing by Mike Miller)

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