ConocoPhillips has cut more than a quarter of its oil production in North America, and putting the brakes on all fracking operations in the continent's biggest coronavirus-linked commodity cutback to date.
The unprecedented restructuring in the business' largest income-generating hub follows a broad expenditure cuts and a cancellation of CEO Ryan Lance's highly important stock-buyback plan. Conoco stock was down 3.1 percent in early sessions on Wall Street on a day when oil futures hovered near an 18-year decline.
ConocoPhillips on Thursday disclosed it was undertaking a new set of actions to contain a plunging oil price and sluggish demand amid a global health crisis. The oil giant pointed out that it is making further capital, operating expenditures and share buyback cuts worth $3 billion.
The Houston oil major, which had been producing more than 1.2 million barrels of crude a day, will slash that by around 225,000 barrels, or 17 percent. It said it is also trimming its capex budget for the year by another $1.6 billion, reducing it to $4.3 billion, down 35 percent from its initial plan.
The company announced in mid-March, when oil prices fell under $30, that it would take $2.2 billion off from its current budget. The additional reductions indicate that it has trimmed down $5.2 billion off its overall operational allocation.
Oil and gas companies in the US have made significant reductions in their operational expenses, ended contracts of thousands of employees and shut-in rigs as pandemic-related lockouts have distorted travel and shuttered businesses, dragging crude prices down by 60 percent so far this year.
Earlier this month, Mizuho Securities analyst Paul Sankey downgraded ConocoPhillips from Buy to Neutral with a price goal of $33, citing concerns about the business driving dividend growth per share when oil markets make a correction.
Sankey, who expects oil inventories to drop in the next three years, stressed that a key factor of the companies share dividend growth forecast in the next 10 years was based on share re-acquisitions.
Conoco said it is cutting output in Canada and the Lower 48 Areas until market conditions normalize. In a statement, the company said these actions reflect our perception that near-term oil prices will remain laggard, mainly as a result of demand effects from the pandemic and ongoing oversupply. By May, Conoco said it will reduce output by around 100,000 barrels of oil per day to 35,000 barrels.
The company still has $4.3 billion in capital spending. Its capex budget adjustments will be applied globally but it considers applying most of it to shale operations in Canada and the US where Conoco has the highest levels of flexibility.
