Chris Wright, CEO of Denver-based Liberty Oilfield Services, said it’s too early to know how the low prices will affect the industry in Colorado and across the region.
“It’s too early to say. We just don’t know how dramatic this is going to be,” Wright told the Denver Post. “We’re all trying to figure out what are the right actions, but certainly the actions will be shrinkage of activity of some meaningful amount.”
The industry is under stress from Wall Street, which wants companies to cut their debt, and from the worldwide spread of coronavirus, which has slowed economic activity and decreased the demand for oil and gas. The dispute between Russia and Saudi Arabia threatens to intensify the pressures by ballooning the existing oversupply of oil.
Occidental Petroleum and other companies with operations in Colorado suffered big drops in stock prices Monday. Occidental, the No. 1 producer on Colorado’s Front Range, saw its stock price drop 52% from Friday to Monday. And on Tuesday, the company announced it will cut its quarterly dividend by 86% and its capital spending this year to between $3.5 billion and $3.7 billion from $5.2 billion to $5.4 billion
Occidental didn’t return requests for comment on the size of the cuts planned for Colorado.
After acquiring Anadarko Petroleum in 2019, Occidental said it would cut its spending in the Rockies from $1.7 billion to $1 billion in 2020 to help reduce its debt.
Dan Haley, CEO and president of the Colorado Oil and Gas Association trade group, said he couldn’t speculate about what the effect on the state’s industry will be and whether companies will scale back their operations.
“I think we’ll see companies make different decisions based on what’s good for them, what’s good for their balance sheet and ledger going forward,” Haley said. “What we’ve seen is that this industry is a resilient industry that’s accustomed to cycles.”
In this March 29, 2013, file photo, workers tend to a well head during a hydraulic fracturing operation outside Rifle, in western Colorado.