In a sign that global economic woes have begun to bite into some of the biggest oil and natural gas producers, ConocoPhillips has dramatically cut its 2009 capital budget and plans to cut 4% of its workforce, or around 1,350 people. The Houston-based oil major also said it would take $34 billion in one-time charges against its 4Q2008 earnings.

Meanwhile, Schlumberger Ltd., the largest oilfield services operator, reported lower earnings Friday, and warned of more spending cuts by its customers in the coming months. Earnings reports by oil and gas producers are expected to begin over the next couple of weeks.

“We are positioning ourselves in the current business environment to live within our means in order to maintain financial strength,” ConocoPhillips CEO Jim Mulva said last week.

ConocoPhillips, the third-largest U.S.-based major by market value after ExxonMobil Corp. and Chevron Corp., has been more aggressive in pursing acquisitions in the past few years than many of its peers. Most of the charges to be taken against 4Q2008 earnings are against North American properties that no longer are estimated to be worth as much as previously thought. The charges would be taken as noncash impairments, which would increase ConocoPhillips’ debt ratio.

Around $25.4 billion would be taken in after-tax charges, which would erase all of the goodwill assigned to its exploration and production assets. The charges are connected to several transactions, but most are related to the merger of Conoco and Phillips Petroleum in 2002, as well as the $34.5 billion acquisition in 2005 of Burlington Resources Inc., which formerly was one of North America’s top natural gas producers. Another $7.3 billion in noncash charges will be taken against a stake in Russia-based OAO Lukoil, whose value fell almost 70% in the last half of 2008.

Capital spending for 2009 is set at $12.5 billion, which is more than 18% lower than in 2008. ConocoPhillips said it replaced only 25-30% of its reserves last year, blaming the shortfall on a drop in the value of its North American reserves.

Despite the large book amounts of the writedowns, Moody’s Investors Service Tuesday affirmed the “A1” long-term and “Prime-1” commercial paper ratings of ConocoPhillips and its subsidiaries with a stable outlook. Moody’s noted that the charges would affect the company’s reported book equity but would have no impact on cash flow or liquidity. However, Moody’s analysts cautioned about ConocoPhillips’ future prospects.

The producer, said Moody’s, “will be challenged in a weaker commodity price environment to replace reserves and grow production, as indicated by both its preliminary reported reserve replacement in 2008 and a 2009 capital budget of $12.5 billion that will be reduced in line with lower oil and gas price expectations.

“The company reported less than full reserve replacement in 2008, at 95% from organic sources (excluding the impact of reserve sales on total replacement), and a significantly lower 41% total replacement, factoring in the impact of price-related downward revisions,” said Moody’s “These results point to the continuing difficulty of replacing reserves and increasing production” for the company and “most of its large integrated peers, particularly in a lower price environment with increasingly restricted access to large new hydrocarbon resources.”

Schlumberger, meanwhile, reported Friday that its profits fell from a year ago.

“We expect 2009 activity to weaken across the board with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins,” said CEO Andrew Gould.

The company is cutting 5,000 jobs worldwide, and Gould warned that more cuts could come in the first half of this year, if necessary. The company employs 87,000 people in about 80 countries.

Gould said on a conference call that most new oil and gas fields were not economical to develop at current commodity prices, and he said it will take time for inflation, which has driven up exploration capital costs, to abate. Reductions across the energy industry, he said, will “sow the seeds of strong rebound.”

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