This Just Hit a Record

Capital spending by U.S. oil and gas producers.

According to a study this week from Global Hunter Securities, America’s top 100 O&G companies spent $316.6 billion on capex in 2012. An all-time high, up 18% from 2011.

Activity is still very strong in the U.S. oil patch. As we’ve discussed, this is keeping costs high. Finding and Development costs for a barrel of oil equivalent jumped 94% in 2012 to $37.30, according to this week’s report.

You can see this in all the data. Below is a chart of employment costs for U.S. workers in the natural resources sector. The index has been rising steadily for the last decade.

130619 BLS NatRes Workers Cost Index

If you look close, you can see that labor costs actually started to trend down in mid-2012. But that has reversed in 2013, with costs now headed sharply higher.

Things keep getting more expensive. Eventually that becomes a bottleneck to productive growth. Let’s see when we hit that point.

Here’s to spending your capital wisely,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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