Energy service provider Hunting said yesterday that oil and gas company capital spending was expected to decline in 2009, as a result of both commodity price decreases and global financial market conditions.
Chief executive Dennis Proctor said it would be implausible to suggest how long and to what extent the expected decline would be.
He said: “At this juncture, many of our operators have yet to announce their budgeted capital expenditure for 2009. Our North American facilities will be more impacted by the decline in natural gas drilling.
“Contracts in south-east Asia and the Middle East should remain solid through the first half of 2009.
“The group’s current trading is good, with an order book for some operations extending into the first half of next year.
“Despite the recent hurricane in the Gulf of Mexico that interrupted production for two weeks, the collapse of oil and gas prices and the global financial crisis, we expect year-end results to be in line with market expectations.”
Hunting said its well-construction division would see a significant year-on-year improvement in earnings because of continued shale-oil and gas drilling in the US and as a result of additional capital expenditure.
It said its well-completion division would have modest year-on-year growth primarily because of delays in North Sea completion activity.
The company added that its exploration and production arm would also see year-on-year growth, its French business would have a slightly lower performance because of slippage of orders into 2009, while Gibson Shipbrokers had experienced a record performance.
Hunting said that, following the £617million sale of North American subsidiary Gibson Energy it was strongly positioned financially. It has already said it will use the proceeds to pay down debt, make acquisitions and invest in Hunting Energy Services.
It said longer-term industry fundamentals remained solid and, on recovery of global market demand, its assets were well placed for strong earnings growth.
Hunting, which employs about 1,500 worldwide, has around 280 employees in a tubulars business at Portlethen and Montrose and at the Hunting Cromar wireline and pressure-control firm in Aberdeen.
Worldwide spending on oil and gas exploration and production will reduce by 12% to about £263billion next year as the sharp fall in energy prices and tight credit markets reverse a six-year trend of rising budgets, according to Barclays Capital.
It forecast spending in the US was likely to show the steepest drop, with a 26% fall from 2008, while Canadian spending was expected to fall 23% to the lowest level since 1999.
Cuts in spending outside North America are predicted to be a more moderate 6%. Russia, the UK North Sea, Saudi Arabia and Venezuela are expected to see some of the deepest spending declines, while the rest of the Middle East, north Africa and Mexico are likely to see increases, the firm said.
In 2008, spending rose about 22% globally, Barclays Capital added.
It said the budget forecasts for 2009 were based on average prices of $58 per barrel for oil and $6.35 per 1,000 cubic feet for natural gas.
Meanwhile, oil prices fell below $34 in the US to the lowest level in almost five years as the global economic slowdown offset Opec’s record 2.2million barrel per day supply cut announced this week.
US crude for January delivery fell $2.35 at $33.87 a barrel, after touching $33.44, the lowest since April 2004. London Brent crude, however, was up 64 cents at $44.
