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Raymond James Energy Stat of the Week
by J. Marshall Adkins

Energy Stat: Oil Supply Isn't Peaking... but Global Upstream Capex Is
April 7, 2014

In our Stat of the Week from February 24, we predicted that U.S. oilfield spending would increase close to 15% in 2014 - considerably above our prior estimate of 5-10%, as well as higher than consensus expectations. The combination of rapidly increasing U.S. oil production and a big y/y jump in domestic natural gas prices is driving cash flow expansion and hence ample room for operators to reinvest without going to the proverbial bank. But how does the picture look globally? At the outset, we should emphasize that there is less clarity on capital spending in countries where oil and gas industries are dominated by state enterprises, especially (though not exclusively) companies without public listings. This includes heavyweights in both OPEC (Saudi, Iran, Venezuela) and non-OPEC (Russia, Mexico, Kazakhstan). While any analysis of global upstream spending carries a limited degree of precision, the basic message is straightforward: there is no escaping the fact that, after years of growth, spending is peaking.

This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.

There is no assurance any of the trends mentioned will continue in the future. Past performance is not indicative of future results. Investing involves risk and investors may incur a profit or a loss. Specific sector investing can be subject to different and greater risks than more diversified investments. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only form a small part of a diversified portfolio. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.

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