Worldwide Oil & Gas Capex Growth Good News for 'Big Four' Services Companies

The Energy Report: James, you have said the energy industry is in the early stages of a strong, sustained upside trend. What's driving that?

James West: Sustained high oil prices are driving a trend toward higher capital spending. Oil prices have been at elevated levelsabove $100 per barrel ($100/bbl) for Brent and $85 and above for WTI (West Texas Intermediate)for close to 40 months. Those are exceptionally good levels for most companies; they can make good profits on projects. Capital investments seem to be accelerating somewhat, particularly in the international markets.

North America is going through a little bit of an efficiency phase and a slowdown from rampant growth. That started after the financial crisis. Now the international markets, which are slower to recover after a financial crisis or downturn, as we saw in 2009, are starting to accelerate.

We recently released an update to our spending outlook, where we survey well over 300 companies in the oil and gas space. These companies represent about 90% or so of capital expenditures (capex) on exploration and production (EP), and they are showing about 13% gain year-over-year (YOY) in the international markets for capital budgets. There have been some regional shifts, but that's a pretty healthy number. Also, globally we're showing about a 10% gain in spending. This is the fourth year in a row of double-digit gains driven by high, sustained oil prices, behind which are many factors, one being limited OPEC spare capacity.

TER: Is the trend equally strong for gas? Continue reading "Worldwide Oil & Gas Capex Growth Good News for 'Big Four' Services Companies"