ConocoPhillips and Occidental Petroleum Corp slashed exploration spending plans for this year, as the third- and fourth-largest US oil companies attempt to cope with a steep slide in crude prices.
The cuts follow similar steps by Hess Corp earlier this week while Royal Dutch Shell, Europe’s largest oil company, said it would reduce its spending in the next three years by $15 billion.
Rising supplies of oil, from sources including North American shale basins, and weakening demand have flooded global markets with crude, sending prices plummeting almost 60 per cent since June. Yesterday crude traded in New York at $43.80 per barrel, much lower than many oil and gas projects require to make money.
In response to the price collapse, oil and gas companies have made drastic cuts to budgets, idled drilling rigs and in some cases, cut jobs.
Conoco, which said in December it would cut 2015 spending by 20 percent to $13.5 billion, now expects spending to be scaled back by a further 15 percent to $11.5 billion. Occidental said it would slash its capital budget by 33 percent to $5.8 billion this year.
“There’s a lot of debate about the duration of the current low oil prices. We’re assuming that they will stay low for 2015 and we’re taking decisive actions accordingly,” said Ryan Lance, Conoco’s chief executive.
Conoco’s second trimming of its 2015 capex budget raised the spectre that others in the industry could further reduce their own spending. That would mark a sharp turnabout for the US oil industry, which has enjoyed five years of blistering output growth thanks to the shale oil boom.
Conoco said it would defer drilling some US onshore exploration programmes and delay spending on some major projects. Occidental said it will pull back spending in North Dakota and in Bahrain. Both companies expect oil and gas output to rise this year, although possibly at a slower rate. – Reuters
