ConocoPhillips cuts production and spending

The actions include:

• An additional reduction in 2020 operating plan capital expenditures of US$1.6 billion, bringing the current estimate to US$4.3 billion. Including the previously announced reduction of US$0.7 billion, this represents a total reduction in operating plan capital expenditures of US$2.3 billion, or approximately 35%, compared to the 2020 announced guidance. These reductions are sourced from across the company's global portfolio, primarily focused on Lower 48, Alaska and Canada areas.
• A reduction in operating costs of approximately US$0.6 billion, representing roughly 10% of the initial 2020 guidance. This brings the current estimate to US$5.3 billion. These reductions were sourced from lease operating expenses, general and administrative costs and foreign exchange impacts.
• The company’s share repurchase programme has been suspended.
• On a combined basis, the cumulative capital, operating cost and share repurchase actions represent a reduction in 2020 cash uses of over US$5 billion versus original operating plan guidance.
• The company also announced it will elect to curtail production in Canada and the Lower 48 regions until market conditions improve.
- At Surmont, the company is currently cutting back production due to low Western Canada Select prices. By May, the company expects to reduce production by approximately 100 000 bpd gross to 35 000 bpd gross.
- In addition, beginning in May, the company plans to begin curtailing production across its Lower 48 region. Initially, the company expects to curtail about 125 000 bpd gross. Curtailment decisions will be made on a month-to-month basis, and are subject to operating agreements and contractual obligations.
- These announced curtailments represent approximately 200 000 boe/d net to the company.

• Given ongoing uncertainty, continued market volatility and the potential for both voluntary and involuntary curtailments over the coming months, the company’s previous 2020 guidance items should not be relied upon and further guidance will be suspended.

“In March we exercised US$2.2 billion of flexibility via reductions in both our planned 2020 capital spending and share repurchases,” said Ryan Lance, chairman and CEO. “At that time, we stated we would continue to monitor the market and exercise additional flexibility, if warranted. Today we are announcing further capital, operating cost and share repurchase reductions of US$3 billion. We also announced our intention to defer production where we have a compelling economic reason to do so. These actions reflect our view that near-term oil prices will remain weak, largely due to demand impacts from Covid-19 and continued oil oversupply. We are well-positioned with flexibility to take actions that we believe maintain our relative competitive advantages, as well as our ability to resume programmes depending on the timing and path of a recovery.”

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/17042020/conocophillips-cuts-production-and-spending/