Oil and gas companies are expected to spend around £441 billion on exploration and production (E&P) in 2014, according to a Barclays Bank report.
This represents a 6.1% increase on E&P spend in 2013, said the bank’s Global 2013 E&P Spending Update.
The Barclays report also said major oil companies were slowing spending growth as they focused their efforts on increasing returns for investors following a waves of shareholder activism in the industry.
Energy companies where activist investors have pushed for shake-ups including offshore drilling Transocean, which became the latest investment target of billionaire Carl Icahn.
Icahn, the 18th richest man in America with a 6% interest in Transocean, has pushed for the company to raise dividends and increase margins by £500 million by 2015 through a process of cost-cutting and improved efficiency.
However, it is not just the companies targeted by activist investors that are feeling the pressure. According to Barclays Bank, big companies – Exxon Mobil, Chevron, Shell, Total and BP – are also under pressure to boost returns.
BP, for example, has raised its dividend, cut back capital spending plans and upped its asset sales target to £6.1billion over the next two years.
Barclays predicts that E&P spending in North America will increase by 7% in 2014, based on a survey of more than 300 oil and gas companies last month.
This follows two years of tepid growth, when weak prices in the United States resulted in onshore drilling for natural gas uneconomical in many fields.
Outside of North America, E&P spending is likely to increase by 6% to £320 million in 2014, according to the Barclays report.
The bank said limited growth by the oil majors and corruption probes directed at Chinese companies was weighing on growth expectations for international, although this will be partly offset by growth in the Middle East, Latin America and Russia.
Barclays also said the mix of spending by oil and gas companies was moving away from large infrastructure projects to drilling, evaluation and completion activity.
This, said the report, suggested a revenue opportunity for diversified oil service companies such as Schlumberger, Halliburton and Baker Hughes.
According to the report, E&P companies based their spending budgets for the year on oil prices of £60 ($98) per barrel for Brent LCOc1 and £54 ($89) per barrel for West Texas Intermediate CLc1, and a benchmark US natural gas price NGc1 of £2.23 ($3.66) per British thermal unit.
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