EOG Resources, Whiting cutting capex budgets at least 30%

EOG Resources and Whiting Petroleum said Monday they were slashing their capital spending budgets by at least 30% amid the ongoing collapse in crude prices and the anticipated global glut of supplies.

Since Saudi Arabia and Russia initiated a pricing war this month to flood the market with more oil starting in April, crude prices have plunged to about $30/b and triggered a wave of spending cuts from North American producers. Many are cutting close to 30%-40% of their 2020 capital dollars, laying down drilling rigs and reducing their daily production guidance.

Houston-based EOG said it would slice its spending by 31% and take its capital budget down to a range of $4.3 billion to $4.7 billion -- well down from the previous budget of up to $6.7 billion. And, after previously projecting crude production volumes would rise by up to 14%, EOG now says it expects its crude volumes to be roughly flat from last year in the range of 446,000 b/d to 466,000 b/d.

EOG said it will keep its drilling focus in South Texas' Eagle Ford shale and in the Permian Basin's western Delaware Basin.

"Our first priority is to generate high returns with every dollar we spend even at low oil prices," said CEO Bill Thomas in a statement. "With oil around $30, our 2020 premium drilling program is expected to generate more than 30% direct after-tax rate of return."

Houston energy investment banking firm Simmons Energy said Monday that publicly traded producers are cutting by close to 30% on average but that anecdotal evidence suggests the private players are slashing their spending by even larger swaths.

Likewise, Bakken shale-focused Whiting Petroleum said it will reduce its capital spending by more than 30% down to a range of $400 million to $435 million. By comparison, Whiting spent $778 million in 2019 and had planned on about $600 million in 2020. Now, it's down to nearly half its total from last year.

"In light of the volatility in commodity prices, we have immediately reduced our development activity and plan to maintain a lower level until we see a sustained commodity price recovery," said CEO Bradley Holly in a statement. The company will remove one drilling rig and completions crew from its Williston Basin operations, he added.

NATURAL GAS REDUCTIONS

To a lesser extent, even the natural gas producers are scaling back more amid the oil price drop. Goodrich Petroleum said Monday it will cut its modest capital budget 25% from $60 million down to about $45 million and focus on its core Haynesville shale acreage in Louisiana. Last year, Goodrich spent just less than $100 million.

However, Marcellus and Utica shale producer EQT Corp. said it will only slice another 6.25% off of its budget, removing $75 million from its new capital budget of just more than $1.1 billion. This is EQT's second budget cut though, now having reduced its capital spending by $200 million since its first guidance back in October.

EQT said it will focus its newest reductions in its Utica shale acreage in Ohio.

In Canada, oil and gas producer Vermilion Energy will cut its spending about 20% from about $320 million down to less than $260 million. Vermilion's new production guidance of 94,000-98,000 boe/d is down more than 5% from its original projections.