NEW YORK - Domestic oil and gas companies are
substantially paring their 1986 exploration plans, particularly
within the United States, industry executives and analysts say.
Beset by the continuing decline in energy prices, and worried
about losing tax provisions they consider necessary to spur
investment, most energy companies have trimmed plans to search for
natural gas, become more selective in choosing and continuing oil
exploration projects and increased their efforts to buy reserves from
Besides having ominous implications for the future survival of
some smaller independent producers, the cutbacks in exploration could
result in the ""worst year yet'' for the beleaguered drilling
industry, according to James D. Crandell, an analyst for Salomon
Energy industry experts said the moves were part of a broad
reaction to declining prices that have roiled energy companies since
1980, resulting in mergers, restructurings, debt repayments and stock
In addition, disappointment over the results at numerous highly
touted oilfields in offshore areas has sapped many American companies
of the will or the cash to maintain current drilling levels.
""Anyone in exploration has to be apprehensive now,'' said Allen
E. Murray, president of the Mobil Oil Corp.
Nonetheless, Murray said that although Mobil was reducing its
exploration budget for 1986, it would not ""rigidly adhere'' to a
cutback. He added, ""If opportunities come, we'll move quickly. But
we have to be cautious. That's just good business sense.'' Murray
declined to disclose budgetary figures.
Mobil's strategy is shared by apparently all the major oil
companies, whose sizable financial resources should help them weather
the downturn until an expected price rebound appears by the end of
However, many smaller independent companies and oilfield-services
firms, already heavily in debt, probably will not survive, analysts
say. These companies work almost exclusively in the United States,
where analysts predict the decline in exploration activity will be
As a result, ""we expect to see more joint ventures,
restructurings, bankruptcies, sales of divisions and companies
attempting to leave the business,'' Crandell said.
A recent Salomon Brothers study found that 20 major oil and gas
companies and 127 smaller independent producers plan to reduce their
1986 exploration and production budgets for the United States
byaverages of 6.1 percent and 6.7 percent, respectively. Most of
that decline will come from reduced exploration budgets, which were
not listed separately.
Among the majors, only Chevron plans to increase its domestic
exploration and production budget, from $2 billion to $2.1 billion,
and that is a result of increases in production spending, accordingto
Larry W. …