Not only is ConocoPhillips revising for a second time its capital spending budget for 2020, but the company is cutting oil production and suspending a share repurchase program.
Eighteen years after Phillips merged with Conoco and moved its headquarters from Bartlesville to Houston, the company said the actions are in response to the oil market downturn and come on top of spending cuts already announced in mid-March.
The company said the curtailment of production is already underway in Canada where production will be cut an expected 100,000 barrels of oil a day to 35,000 barrels of oil a day.
Cutbacks in the U.S. will begin in May where the company plans to curtail about 125,000 barrels of oil a day. The company explained the curtailment decisions will be on a month-to-month basis and subject to operating agreements and contractual obligations.
The announced curtailments represent about 200,000 barrels of oil equivalent a day net to the company. In addition, ConocoPhillips said it was suspending a share repurchase program.
“In March we exercised $2.2 billion of flexibility via reductions in both our planned 2020 capital spending and share repurchases,” said Ryan Lance, chairman and chief executive officer. “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 $3 billion. We also announced our intention to defer production where we have a compelling economic reason to do so.”
Ryan said the actions reflect the view of company leaders and experts that the 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 programs depending on the timing and path of a recovery.”
The announced actions include an additional reduction in 2020 operating plan capital expenditures of $1.6 billion, bringing the current estimate to $4.3 billion. It makes a total reduction of $2.3 billion or nearly 35% compared to the 2020 announced guidance.
Lance continued, ” We’re doing the right things to protect shareholder value during this downturn, while maintaining our ability to create long-term value for shareholders when market conditions recover.”
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