Global Oil and Gas Spending to Hit Record Highs in 2012 [BARCLAYS REPORT]

ExxonMobil Exploration Company used the Maersk Developer semi-submersible drilling rig, shown here, to drill ExxonMobil's first post-moratorium deepwater exploration well in the Gulf of Mexico. Photo: Business Wire

HOUSTON (Dow Jones)–Oil and gas companies are expected to spend at record levels in exploration and production projects worldwide in 2012, with investment reaching $598 billion, a 10% jump from this year, according to a report by Barclays Capital released Monday.

Exxon Mobil Corp. (XOM) is expected to remain the largest capital spender in oil and gas projects in the world in 2012 with a budget of about $35 billion, according to the study, which surveyed 350 oil and gas companies globally. Exxon’s 2012 budget is expected to be about 5% higher than this year, an investment below the two-digit increase expected for other oil majors such as BP PLC (BP), Total SA (TOT), Royal Dutch Shell (RDSA) and Chevron Corp. (CVX), according to the report. ConocoPhillips (COP) said Friday it expects to spend $15.5 billion in capital programs next year, up 15% from 2011.

State-run PetroChina Co. (PTR) is gaining ground with spending expected to reach close to $30 billion next year, while Chevron Corp. (CVX) and Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, could also close the gap in the next several years, according to the report.

Capital investment in the U.S. and Canada is expected to rise 8% in 2012 compared with this year, while spending in other regions such as Latin America, Africa, Europe, the Middle East and Russia is expected to jump 11%, according to Barclays.

Companies investing in North America expects to spend 64% of their budget in shale oil and gas projects with higher spending expected to go toward the Permian Basin in West Texas, according to the report.

Oil and gas companies are basing their 2012 capital spending budgets on an average oil price of $87 per barrel for West Texas Intermediate crude, the U.S. benchmark, and $98 a barrel for Brent, the European benchmark. This compares to current WTI and Brent prices of $101 and $110, respectively, “indicating that oil and gas companies are likely taking a conservative view on oil prices, given the uncertain economic environment,” the report said.

This also shows companies could increase their spending plans if they become more confident about the sustainability of high oil prices, it added.

Recently announced large discoveries in various regions of the world show that exploration activity is likely to be at the forefront of oil and gas companies’ spending growth next year, according to Barclays. In 2010, 32% of companies planned on increasing the percentage of the budget dedicated to exploration. This grew to 38% in 2011 and is expected to rise to 42% in 2012, according to the report.

A group of companies poised to benefit from rising exploration and production spending are oilfield service companies such as Schlumberger Ltd. (SLB), Halliburton Co. (HAL), Baker Hughes Inc. (BHI) and Weatherford International Ltd. (WFT), which are likely to continue to secure profitable contracts, the report said.

“We remain bullish on the oil service, equipment and drilling companies and believe the group will significantly outperform the broader equity market over the next several years,” Barclays said.

Rig owners are expected to benefit from the recovery in the U.S. Gulf of Mexico, where drilling activity is expected to continue to pick up next year to levels similar to prior a moratorium the government imposed after last-year Deepwater Horizon oil spill.

Rates for deepwater rigs have recovered to more than $500,000 per day from around $400,000 following the moratorium. The trend is expected to continue in 2012 as a shortage of deepwater rigs that meet heightened safety standards, the report said.

-By Isabel Ordonez, Dow Jones Newswires