Oil market downturn pushes ConocoPhillips to trim capex by 10 pct
Oil major ConocoPhillips is taking several actions in response to the recent oil market downturn.
The number of oil and gas operators deciding for massive cuts to its budgets is increasing every day. ConocoPhillips has now joined Kosmos Energy, ExxonMobil, Hess Corporation, Husky Energy, Premier Oil, Noble Energy, Murphy Oil, and Apache among others.
“Our industry is clearly experiencing an unprecedented event brought about by simultaneous supply and demand shocks,” said Ryan Lance, chairman and chief executive officer in a statement on Wednesday.
“The actions we are now taking reflect an acknowledgment of current events as well as uncertainty around the timing and path of recovery.”
Lance continued, “We believe we have a significant advantage compared to most of the industry through our strong balance sheet, diverse and low-decline portfolio, and low capital intensity. We ended 2019 with over $14 billion of liquidity, including cash, cash equivalents, short-term investments and availability under our revolving credit facility. We continue to monitor market conditions and consider various scenarios to inform any future actions. We have a significant level of flexibility between our capital, operating costs, and share repurchase program, but we are choosing to exercise only a portion of it at this time. We believe that the highest-value longer-term response is price-path dependent.”
ConocoPhillips’ actions include the reduction of its 2020 operating plan capital expenditures by $0.7 billion, representing about a 10 percent decrease from the previously announced guidance.
According to the company, the reduction will be sourced by slowing operated development activity in the Lower 48, expected decreases in non-operated activity in the Lower 48, and deferred drilling in Alaska. These reductions are expected to impact 2020 full-year production guidance by approximately 20 thousand barrels of oil equivalent per day (MBOED).
Furthermore, the 2020 planned share repurchase program will be reduced to a quarterly run rate of $250 million beginning in the second quarter, from the previous run rate of $750 million.
On a combined basis, the capital and share repurchase actions represent a reduction in 2020 cash uses of $2.2 billion, with a limited impact to the company’s productive capacity.
The company said it would continue to review its capital and operating plans and will provide a full 2020 guidance update in conjunction with first-quarter earnings on April 30.
“Today’s circumstances require action and we believe we’re taking the right steps at the right time,” Lance continued.
“Current conditions represent a significant challenge for our industry overall, but we remain focused on creating long-term value, especially through cycles.”