Matador, MEG Energy dial down 2020 spending, activity

US' Matador Resources and Canada's MEG Energy have become the latest two upstream producers to dial down their capital spending and drilling activity, owing to low oil prices brought about by the coronavirus outbreak.

Cutbacks announced by several companies this week, including Diamondback Energy, Parsley Energy, Marathon Oil, Ovintiv and Occidental Petroleum, come after oil prices crashed by 25%, or about $10, Monday into the low $30s/b, amid lower global crude demand. At midday Wednesday, WTI was trading around $33.36/b, down $1, or about 3%.

On Wednesday, Matador said it would drop one of its six operated drilling rigs by the end of this month and should release two additional rigs before the end of June. The company will operate three rigs for the rest of 2020, it said in a statement.

"As we navigate this abrupt change in oil prices, our first priority is to protect our balance sheet and to position ourselves for the long run," Matador CEO Joseph Foran said, echoing the sentiment of several upstream companies this week that have curtailed 2020 activity and spending.

Matador will continue pursuing divestitures of non-core assets, including potential sales of South Texas leasehold and mineral interests and the Haynesville Shale in East Texas/Northwest Louisiana, and also possibly a joint venture or divestiture of its Delaware Basin mineral interests in West Texas and New Mexico.

Matador also foresees suspending development activities in its Wolf asset in Loving County, Texas, by the end of this month.

At least two of its remaining three rigs will operate full-time in the Stateline asset area in Eddy County, New Mexico, Matador said.

The company said it is evaluating other options to raise cash flow and further cut operating expenses and capex in the second half of the year and will provide more specifics in the coming weeks.

The CEO also said he has "voluntarily agreed" to reduce his base salary 25%, while board members have agreed to reduce their compensation 25% and the executive team and vice presidents by 20% and 10%, respectively.

MEG CUTTING CAPEX 20%

Oil sands operator MEG Energy said late Tuesday it will reduce its capital spending 20% to $200 million.

Most of the $50 million capital reduction from MEG's prior $250 million capex level will be from reducing the scope of a planned turnaround associated with well pairs previously targeted to come on stream this year and bring output to roughly 100,000 b/d.

As a result of its capital reduction, MEG's 2020 production guidance has been revised downward less than 2% from 94,000-97,000 b/d to 93,000-95,000 b/d.

MEG has WTI fixed price swaps for about 70% of its first-half 2020 production volumes at an average $59.15/b. On a full-year basis, the company has hedged about 55% of forecasted 2020 production.

It has also hedged 30% of its differential exposure to WTI-WCS at an average price of $19.39/b and 50% of its condensate exposure at an average price of 101% of WTI.