ConocoPhillips, the largest independent in the country, is slicing its 2015 capital spending by 20% -- significantly more than it had estimated at the end of October -- with capital targeting the Eagle Ford and Bakken shales but deferred investments now planned in the Permian Basin, and Niobrara, Montney and Duvernay formations.
The Houston operator said its capital expenditures (capex) would total $13.5 billion in 2015, about one-fifth less than this year. Lower outlay mostly is directed to "major projects, several of which are nearing completion,” the company said.
ConocoPhillips' preliminary capex budget for 2015, which CEO Ryan Lance announced in late October, was forecast to be around $16 billion, about $500 million (4%) below 2014 (see Shale Daily, Oct. 31). The latest update takes into account the deep slide in oil prices since the beginning of November.
"We are setting our 2015 capital budget at a level that we believe is prudent given the current environment," said Lance Monday. "This plan demonstrates our focus on cash flow neutrality and a competitive dividend, while maintaining our financial strength. We are fortunate to have significant flexibility in our capital program.
"Spending on several major projects has peaked, and we will get the benefit of production uplift from those projects over the next few years. In addition, we have significant identified inventory in the unconventionals, where we also retain a high degree of capital flexibility."
Around $5 billion is budgeted for development drilling, versus a 2014 budget of $6.5 billion. Lower 48 capital would continue to target the Eagle Ford and Bakken, which led company-wide growth in 3Q2014, and together averaged 212,00 boe/d, about one-third higher year/year. Total Lower 48 output in 34Q2014 average 343,000 boe/d, 9% higher year/year. Eagle Ford production was 25% higher in 3Q2014 than in the year-ago period, while Bakken output rose 62%.
Development spending in the less developed items in the portfolio, which include the Permian Basin, Colorado's Niobrara formation, and Canada's Montney and Duvernay formations, is off the table, Lance said. However, "the company retains the flexibility to ramp up or down activity in the unconventionals."
Even with lower spending, however, production still is projected to increase by about 3% year/year on continuing operations, boosted by startups and expansions in the Eagle Ford and Bakken, and from Surmont Phase 2, an oilsands project in Alberta.
About $4.8 billion is to be spent to focus on several sanctioned major projects, including an Australian liquefied natural gas export project, Alberta oilsands facility Surmont phase 2, and multiple projects in Alaska, Europe and Malaysia.
Another $1.8 billion of the 2015 budget is allocated for exploration and appraisal programs, down slightly from 2014. This spending would focus on conventional activity in the U.S. Gulf of Mexico, offshore Nova Scotia and West Africa, and some unconventional North America activity. Another $1.9 billion is to go for base maintenance and corporate expenditures, a slight reduction compared with 2014, to reflect lower planned spending in several producing assets across the portfolio.
Additional details on the capital program and production outlook are scheduled on Jan. 29 during a conference call to discuss 4Q2014 results.