ConocoPhillips Cuts 2020 Expenditure by 10%

ConocoPhillips will reduce its 2020 capital expenditure by $700mn, representing about a 10% decrease from the previously announced guidance, owing to a sharp drop in oil prices and Covid-19 outbreak, it said March 18 in a statement.

“Our industry is clearly experiencing an unprecedented event brought about by simultaneous supply and demand shocks,” CEO Ryan Lance said. “The actions we are now taking reflect an acknowledgment of current events as well as uncertainty around the timing and path of a recovery.”

The reduction will be sourced by slowing operated development activity in the Lower 48 states, expected decreases in non-operated activity in the Lower 48, and deferred drilling in Alaska, the company said. These reductions are expected to impact 2020 full-year production guidance by approximately 20,000 barrels of oil equivalent/day.

The company has joined a slew of producers of all sizes who have announced radical cost-cutting plans as the Brent crude oil price has declined sharply this month. At the time of the press, Brent was trading at $26/barrel.

ConocoPhillips will also reduce its 2020 planned share repurchase programme to a quarterly run rate of $250mn beginning in Q2, from the previous run rate of $750mn. The combined moves are expected to reduce 2020 cash use by $2.2bn, it said.

“Today’s circumstances require action and we believe we’re taking the right steps at the right time,” Lance said. “Current conditions represent a significant challenge for our industry overall, but we remain focused on creating long-term value, especially through cycles.”