ConocoPhillips said it plans to extend cuts to its capital expenditures (capex) budget through 2017, citing low oil prices, but expects production volumes to continue to increase. Separately, the largest independent operator in the United States said it plans to cut about 7% of its workforce in Canada, also as a result of low commodity prices.
On Tuesday, ConocoPhillips announced a three-year plan to reduce its annual capex budget from $16 billion to $11.5 billion, essentially taking the cuts it made last December and January to the 2015 budget and extending them into 2017 (see Shale Daily, Jan. 29; Dec. 8, 2014). The company added that under the revised plan, it expects spending on its development drilling program to increase while major project spending continues to decrease.
"For the past three years, ConocoPhillips has consistently delivered our stated objectives against a backdrop of relatively high, stable commodity prices," said CEO Ryan Lance. "As commodity prices declined in late 2014, we took decisive action to adjust our 2015 spending.
"We now believe it is prudent to position the company for lower, more volatile prices for the foreseeable future. Our new plan will continue to focus on delivering a compelling dividend, while also achieving sustainable, modest volume growth and competitive returns. We strongly believe this is an attractive formula for shareholders and we look forward to sharing the details of our plans."
Houston-based ConocoPhillips said it plans to provide more details over the three-year capex plan at its upcoming meeting with analysts on April 8 at 9:00 a.m. EDT. At that time it also plans to give an overview of its financial priorities, regional investment programs and projects, technology and cost initiatives, and a review of its resource base.
The company added that it expects production volumes, excluding Libya, to increase 2-3% in 2015, reaching 1.7 million boe/d in 2017. By comparison, production was 1.53 million boe/d in 2014, again excluding Libya.
"We're taking this period of commodity price weakness to position ConocoPhillips for long-term success in any price environment," Lance said. "Our updated plan is more resilient to lower prices, yet allows us to benefit from periods of higher commodity prices. The flexibility of our investment portfolio, our technical capability and our financial strength give us an advantage that we are seizing. We've delivered for the past three years and we are committed to continuing our track record of success under this disciplined plan."
Separately, ConocoPhillips spokeswoman Andrea Urbanek confirmed to NGI’s Shale Daily on Wednesday that the company plans to cut 7% of its workforce in Canada, about 200 employees.
"The challenging economic environment has required us to make some difficult decisions," Urbanek said.