DCP Midstream cuts capital spending 75% as midstream sector slices more than $2 billion

Houston — DCP Midstream said Monday it will cut its capital spending by 75% as the midstream sector slowly begins making bigger budget cuts in response to the collapse in oil prices.

The North American midstream sector has announced well more than $2 billion in capital cutbacks, but that compares to the broader sector of upstream producers and the global integrated majors that already have said just in March they will cut well more than $25 billion in combined capital spending this year.

DCP, which is a joint venture between Phillips 66 and Enbridge, said it will reduce its capital spending from about $600 million to $150 million, including deferring its plans to buy 30% ownership stakes in Phillips 66's fractionator expansion projects in Sweeny, Texas. DCP said it may reduce its 2021 capital budget to as low as $50 million.

The midstream firm also is slicing its distribution payments to investors in half, bringing its quarterly payouts down to 39 cents per unit to save DCP another $325 million in cash.

NYMEX WTI has plunged to less than $23/b as of Monday afternoon because of cratering global oil demand from the new coronavirus pandemic and the ongoing pricing war between Saudi Arabia and Russia that threatens to send a glut of crude on the market starting in April.

While the upstream sector moved quickly to cut spending by at least 30%, only a handful of midstream players rushed to make public spending decisions.

OTHER MIDSTREAM CUTS

EnLink Midtsream said last week it would trim its capital budget more than 30% down to a mid-point guidance of $255 million. Likewise, Targa Resources cut its capital spending 32% to about $855 million. Targa also slashed its dividend payments almost 90% down to just 10 cents per share each quarter.

Oklahoma-based ONEOK cut its spending 25% down to $2 billion. Those cutbacks include ONEOK suspending the additional 100,000 b/d expansion of its West Texas LPG pipeline and the expansion of its natural gas processing facilities in the Williston Basin. Lastly, the pipeline firm will reduce the scope of its Elk Creek Pipeline expansion that treks from the Bakken shale down to Kansas.

Big midstream players such as Houston's Enterprise Products Partners have only said they're reviewing revisions to their planned spending levels. Many companies may simply wait to announce changes until their release their first-quarter earnings results.

In Canada, Pembina Pipeline slashed its capital budget more than 40% from nearly $1.6 billion down to $900 million. Pembina will defer the seventh, eighth and ninth expansion phases of its Peace Pipeline system, as well the expansion of its Prince Rupert Terminal in British Columbia.

Pembina is instead focusing mostly on cheaper optimization projects of its existing pipelines to move more crude oil and gas volumes per day.

On the other hand, Calgary-based Inter Pipeline said it would only cut its capital dollars by 7.5% down to about $760 million.