ConocoPhillips is reducing its 2020 capital expenditure for the second time in one month and is curtailing some production in Canada and the U.S. until market conditions improve, the oil and gas producer said on Thursday, joining other U.S. firms that have already cut spending budgets twice since the oil price collapse in early March.
ConocoPhillips announced additional reductions of US$1.6 billion in its capex, bringing the current estimate to US$4.3 billion. Including the first capex cut of US$700 million announced in March, ConocoPhillips is cutting around 35 percent of its original 2020 capex guidance. These reductions in spending will be primarily focused on the Lower 48, Alaska, and Canada areas where the firm has the highest levels of flexibility, it said on Thursday.
ConocoPhillips is also voluntarily curtailing 200,000 barrels of oil equivalent per day (boe/d) net to the company until market conditions improve. At Surmont in Canada, ConocoPhillips is currently cutting back production due to low Western Canada Select (WCS) prices, which were below US$5 a barrel as of Thursday. By May, the firm expects to cut production by some 100,000 barrels of oil per day bpd gross to 35,000 bpd gross. ConocoPhillips will also begin to curtail production across its operations in the Lower 48 in May.
“Curtailment decisions will be made on a month-to-month basis, and are subject to operating agreements and contractual obligations,” the company said, adding that it had also suspended its share buyback program.
ConocoPhillips is not the first U.S. producer to cut spending twice in one month. Last week, Marathon Oil slashed its 2020 capital spending budget for a second time in one month and announced frac holidays in the Bakken and Eagle Ford amid extremely weak commodity prices and demand.
Commenting on U.S. firms’ capex cuts, Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said at the end of March:
“The size of cuts is close to those of 2015 and have come through faster. Yet companies today are far leaner than back then; and what we’ve seen so far may just be a taste of what’s to come. Diamondback and Occidental have already cut twice in two weeks, suggesting further, deeper cuts are coming for many US Independents.’’
By Tsvetana Paraskova for Oilprice.com