Moderate spending growth in North America should offset declines internationally, according to a recent report from Bernstein Research. The report forecast 9% growth in North American exploration and production (E&P) spending this year. Bernstein’s estimate “reflects commodity prices being higher than what’s likely in budgets ($90 WTI and $4 gas) as well as stabilization in the reinvestment rate for the industry.”

Meanwhile, international growth is expected to decelerate, from 10% last year to 5% this year. While spending growth in the Middle East and by international E&Ps is expected to remain healthy at 12% and 9%, respectively, the overall growth rate is pulled down by a 10% decline in spending by European majors and a drop to 5% from 14% in spending in the Asia-Pacific region. This is surprising, considering 17% growth in India and 7% growth in China, but other Asian subregions see a 4% decline, mostly because of lower LNG-targeted spending by Woodside, Santos and Oil Search, according to the report.

In addition, the firm slightly raised its global E&P spending outlook for the year from 6% to 7%, once again due to higher-than-expected gas prices in North America. The report estimates that global spending growth, led by North America, will total $815 billion.

“The overall forecast of 5% international growth represents a slowdown from the last four years, which averaged 11% growth annually,” according to the report. “This reinforces our belief that there remains more upside for North America-exposed companies this year, as North America should again see higher growth than international after a reversal last year."

The Permian Basin will top the charts for North American E&P spending growth this year with a whopping 21% increase, according to the report. The rate was calculated from guidance from a “select group” of E&Ps. The report also predicts “healthy spending growth” in more mature basins, including 10% in the Bakken, 9% in the Marcellus and 8% in the Eagle Ford. Companies that provide services to the shale basins are projected to benefit most from the spending growth. While the report estimates 10% growth year-over-year (less in Canada), the frack stage growth is expected to be twice that, as horizontal well creation grows at a faster rate.

“Even accounting for efficiency gains, demand for pumping services should be in the low teens,” according to the report.

Thus, Bernstein favors companies with shale service exposure, and rates Halliburton Co. (NYSE: HAL), Schlumberger Ltd. (NYSE: SLB), Baker Hughes Inc. (NYSE: BHI) and Nabors Industries Ltd. (NYSE: NBR) Outperform, according to the report. But, the firm remains “cautious” on offshore services and equipment.