In 2006, Hess Corporation (NYSE:HES) invested $3.84 billion in capital spending. Last year, the company spent $3.58 billion, and while the figure for this year isn’t final yet, Hess planned to spend about $5 billion on capex and exploration. The company reported spending for the first nine months of 2008 at nearly $3.3 billion.
For 2009, the company has announced plans to spend $3.1 billion oncapex, with about half of that going to increasing production in theGulf of Mexico, the Bakken Shale play in North Dakota and a facilityoffshore west Africa. This spending level represents a dramaticdecrease from 2008.
Lower crude prices are hitting E&P and capex budgets hard. Unlessprices rise to more than $60/b, look for ever-shrinking capex budgetsin 2009. The current difficulty in getting credit compounds the oilindustry’s cyclical capex spending behavior. And whatever the capitalinvestment level, it needs to pay off in production. Exploration anddevelopment will slow even more, which will not help oil fieldsservices companies or drillers.
Paul Ausick
December 8, 2008
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