ConocoPhillips and other oil producers slash their budgets deeper

Houston — ConocoPhillips said Wednesday it will cut $700 million from its planned 2020 capital spending as producers continue to slash their budgets amid a new, dire oil environment of less than $25/b.

ConocoPhillips, Parsley Energy, WPX Energy and Cimarex Energy were all among the North American oil producers on Wednesday or late Tuesday to shave big swaths of dollars from their planned spending as the industry enters a retrenchment mode as global oil demand falls and Saudi Arabia and Russia launch a crude pricing war.

ConocoPhillips said it will slice its 2020 spending by more than 10% down to about $5.9 billion and that its production guidance will fall roughly 2% to a mid-range of 1.23 million boe/d.

"Our industry is clearly experiencing an unprecedented event brought about by simultaneous supply and demand shocks," ConocoPhillips CEO Ryan Lance said in a statement. "The actions we are now taking reflect an acknowledgement of current events as well as uncertainty around the timing and path of a recovery."

The largest independent North American producer, ConocoPhillips had already touted itself for its more conservative spending plans. Lance said the company will slow its activity in US shale plays and defer drilling in Alaska, while also reducing its 2020 share repurchasing plans by an additional $1.5 billion.

"None of us have ever seen what's currently taking place in the energy markets," Lance said in a Wednesday conference call.

But he also noted that ConocoPhillips could become an interested buyer of distressed companies and assets once prices begin to stabilize.

"The rationale for consolidation in this sector only got stronger with this downturn," Lance said. "We're watching, we're paying attention, but it's got to fit the financial framework."

Even with the reductions in production guidance, ConocoPhillip's crude volumes are still expected to rise. The company indicated its US shale volumes should increase by about 7% in 2020, instead of the originally projected 11%.

BIG CUTS ABOUND

Other US producers, including Parsley, WPX and Cimarex, are cutting their spending by much larger percentages in part because they have smaller budgets. They're eliminating anywhere from 25% to more than 40% of their capital budgets.

Permian Basin producer Parsley, which previously had said it was pulling a few drilling rigs, will now cut its spending by more than 40% from about $1.7 billion down to less than $1 billion, reducing its rig count from 15 rigs down to about five.

"This is not a time for indecision or half measures," said Parsley CEO Matt Gallagher in a statement Wednesday.

WPX Energy will cut its capital spending by nearly 25% from about $1.74 billion down to $1.34 billion, based on mid-range guidance, while its average oil production would fall about 6% from 160,000 b/d down to 150,000 b/d.

Cimarex is slashing more deeply, cutting its capital budget by about 45% from $1.3 billion down to $715 million. The Permian producer would see its oil production guidance plunge more than 8% from 94,000 b/d down to its 2019 level of 86,200 b/d.

In Canada, oil producers are continuing to follow suit.

Whitecap Resources said it would slice its spending nearly 45% down to just more than $140 million and that its production would fall about 6% to 67,500 boe/d.

Likewise, Calgary-based Kelt Exploration said it would trim spending 36% down to $100 million with its production dipping 12% to 35,000 boe/d.