Carrizo Oil & Gas Inc. is following in the footsteps of many of its peers and cutting capital spending compared to last year’s levels as it preserves capital for better times. The Eagle Ford Shale is the focus area, and any potential divestitures are on hold for the time being.

Carrizo’s initial 2016 drilling and completion plan is $270-290 million, a decrease of nearly 45% from the 2015 level. This should allow for one to two rigs running in the Eagle Ford during the year as well as continuing testing of Carrizo acreage in the Delaware Basin, a sub-basin of the Permian. The company’s initial land and seismic capital expenditure plan is $15 million.

The company initial 2016 oil production guidance of 24,700-25,300 b/d. Using the midpoint of this range, 2016 oil production growth guidance is 8%. For natural gas and natural gas liquids (NGL), Carrizo is providing initial 2016 guidance of 45-60 MMcf/d and 3,700-4,000 b/d, respectively.

For the first quarter, Carrizo expects oil production to be 24,800-25,200 b/d, and natural gas and NGL production to be 60-64 MMcf/d and 3,800-4,000 b/d, respectively. Carrizo said it expects crude oil production in the fourth quarter of 2016 to exceed crude production in the fourth quarter of 2015.

“Our primary focus in the current commodity price environment is protecting our balance sheet,” said CEO Chip Johnson. “As a result, we are reducing our drilling and completion capital expenditure plan by nearly 45% for 2016. However, despite the significant reduction, we still expect to keep our oil production roughly flat with the fourth quarter of 2015.

“While the current program is focused on the Eagle Ford, it also provides us with the flexibility to continue testing our Delaware Basin acreage and manage our leasehold in other areas. Based on the current commodity price strip, we believe this plan optimizes our cash flow, liquidity, and leverage metrics not just in 2016, but also in future years. The plan also provides the company with enough flexibility to quickly increase or decrease activity in response to further changes in the commodity price outlook.”

Like many of its peers, Carrizo grew its crude production substantially in recent years (see Shale Daily, Oct. 16, 2015).

During a conference call on Tuesday, Johnson was asked about whether Carrizo was considering divestitures of noncore assets. He said the company has talked about selling assets that aren’t garnering any spending and has opened some data rooms. However, he said, “the bankers have basically told us, ‘let’s just watch the market for another month or two…”

For now, dialing back spending and cutting costs are the priorities in order to preserve the balance sheet for better days.

“…[W]e are seeing the benefit of our overhead reduction initiatives, which should result in an approximate 15% reduction in our annual cash [general and administrative] expense this year,” Johnson said. “Financially, we ended the year with a solid liquidity position as we had an undrawn revolver and a strong 2016 hedge book. This, coupled with our deep inventory of some of the lowest breakeven-cost assets in the industry, has us well positioned to manage the current environment and quickly ramp up production once we get an appropriate commodity price signal.”

Carrizo reported a fourth quarter loss of $380.7 million ($6.73/share) compared to income of $129.5 million ($2.79/share) in the fourth quarter of 2014. The loss includes a full cost ceiling test impairment recognized during the quarter. Adjusted net income was $18.5 million (32 cents/share) compared to $14.8 million (32 cents/share) in the fourth quarter of 2014.