ConocoPhillips is the new major upstream energy firm headquartered in Houston to slash spending in the wake of the collapse of oil prices in the global market.
The US multinational energy conglomerate said Wednesday it is slashing its capital budget for 2020 by 10 percent, or around $700 million, as it is struggling to adapt to steep oil price falls. Reining in construction operation and deferral of exploration in Alaska would accomplish the reduction, it said.
"The market is obviously witnessing an extraordinary event triggered by simultaneous disruptions in supply and demand," Ryan Lance, president and chief executive officer, said.
The firm would also cut $500 million from a quarterly stock-repurchase plan beginning in the second quarter, saving an estimated $1.5 billion. ConocoPhillips wrapped up the final quarter of 2019 with more than $14 billion of cash and credit.
Cutting capital and share repurchases is estimated to save ConocoPhillips a total of $2.2 billion, according to a press release published on March 18.
The company plans to slow down controlled exploration activity in the Lower 48 Area, decrease unoperated activity, and postpone drilling in Alaska. These activities are expected to reduce the guidance for full-year production by about 20,000 barrels of oil equivalent per day this year.
ConocoPhillips unveiled its savings program, as seven of the state of Texas' most prominent shale drillers cut from their budgets a whopping $7.6 billion in response to rapidly dropping oil prices.
West Texas Intermediate crude oil traded on Wednesday morning at $24.61 per barrel, a price which has not been seen since March 2002. Overseas, a rivalry between Russia and Saudi Arabia has generated a global supply surplus even as the outbreak of coronavirus has brought down global demand.
In addition, ConocoPhillips would cut back on the amount it spends on buying back stock. In February, the board of directors of the corporation approved an increase of $10 billion to $25 billion in the current share repurchase program.
ConocoPhillips at the time expected to buy back stock worth $3 billion in 2020, or $750 million per quarter. Starting in the second quarter, the number will be reduced to $250 million per quarter.
Also with the cuts in the requirements for growth, ConocoPhillip is still expected to increase the crude volumes. The company reported that its U.S. shale volumes are expected to rise by about 7 percent in 2020, rather than the originally estimated 10 percent.
Many US manufacturers, including Parsley, WPX, and Cimarex, partly cut their spending by far higher percentages because they have smaller budgets: from 25 percent to more than 40 percent of their capital expenditures.
