More oil companies cut their budgets in oil price war

Devon has cut its cap-ex amidst the oil price war. So has ONEOK and Murphy Oil and Dallas-based Matador Resources. More companies are making similar moves.

Others in the oil-rich Permian Basin are following suit as oil tumbled into the $30 to $31 a barrel range. Some observers say most companies will likely go into maintenance mod and cut their expenses as much as possible, knowing no shale drilled now will make any money.

Morgan Stanley says the oil and gas industry needs $51 a barrel just to fund their capex budget this year and Western Texas Intermediate crude prices are at least $20 short.

Some of the Texas firms that cut their budgets were Apache which cut spending by 37% and said it would eliminate all of its rigs in the Permian basin. It also planned to cut its dividend payout by 90%.

As OK Energy Today reported earlier, Devon announced plans to cut its capex by 30 percent, with Oklahoma’s STACK and Wyoming’s Powder River Basin being affected the most in decreased drilling activity.

Marathon Oil planned to make cuts by more than 20% while PDC Energy will decrease spending by 20 to 25%

Occidental Petroleum also cut its dividend by more than 85 percent, and spending by 32 percent.

Some analysts and market watchers believe the oil industry could see $380 billion in cash flow “vanish” if oil prices average $35 instead of $60.

Wood Mackenzie said “sustained crude prices below $40 a barrel would trigger a new wave of brutal cost-cutting.”

During the last downturn between 2014 and 2016, companies slashed spending and ultimately were able to do more with less (although that required a lot of debt). “At today’s spot price, none of that matters. Because there’s no fat left to trim in 2020, the cuts to development activity are necessarily fast and brutal,” the WoodMac analysts said.