ConocoPhillips, determined to get out of deepwater drilling in the Gulf of Mexico (GOM) and battered by a $1.5 billion 1Q2016 net loss, said Thursday that it would slash its 2016 capital expenditures (capex) budget by $700 million.

“We continue to safely deliver on our operational targets while taking steps to manage through this period of low prices,” said CEO Ryan Lance. “During the quarter, we took actions to conserve cash, improve liquidity and position the company for strong performance as prices improve.”

In a sign of just how grim the commodity price environment has become — and how long it’s expected to last — the Houston-based producer earlier this year cut its quarterly dividend for the first time in at least 25 years (see Shale Daily, Feb. 4).

At the same time, it also revised plans it had announced in December (see Shale Daily, Dec. 10, 2015), cutting capex from $7.7 billion to $6.4 billion and operating cost guidance from $7.7 billion to $7.0 billion. On Thursday, it further reduced capex to $5.7 billion, and said it has raised $4.6 billion of low-cost debt and ended 1Q2016 with $5.2 billion of cash and short-term investments.

“These actions, in combination with ongoing strong execution of the business, allow us to deliver on our value proposition, which recognizes the importance of distributions to shareholders, disciplined capital allocation, a focus on returns and a strong investment-grade balance sheet,” Lance said. “As challenging as this price downturn has been, we are a much stronger company for the long term…There’s no getting around it, it was a very weak quarter financially.”

But there was brighter news on the operational side. “We’re running well and our key projects are on track,” he said.

The company expects to meet its previously stated full-year 2016 production guidance of approximately 1.53 million boe/d, in line with 2015 production. 2Q2016 production guidance is set at 1.50-1.54 million boe/d. The company’s other guidance items remain unchanged, with 2016 operating costs of $7 billion, corporate segment net expense of $1 billion, depreciation, depletion and amortization of $8.5 billion; and exploration dry hole and leasehold impairment expense of $800 million.

ConocoPhillips reported 1Q2016 production of 1.58 million boe/d, a decrease of 32,000 boe/d from the previous first quarter. “Normal field decline and impacts from dispositions exceeded growth from major projects and development programs, improved well performance, and the impact of lower prices on royalties and production sharing contracts,” the company said. “When adjusted for 66,000 boe/d from dispositions and downtime, production increased 34,000 boe/d, or 2%.”

In the Lower 48, first quarter production was 491,000 boe/d, down from 506,000 boe/d in 1Q2015. There were 13 rigs operating in the Lower 48 at the end of 2015; there are currently only three, ConocoPhillips said, a number the company plans to maintain through 2016. ConocoPhillips achieved 30-35% drilling and completion cost efficiencies in the Eagle Ford and Bakken in 1Q2016 compared with 1Q2015. And ConocoPhillips is progressing in its exit from deepwater exploration, as it first discussed last year (see Daily GPI,July 17, 2015).

The non-operated Gibson well currently drilling in the GOM is the last exploration well ConocoPhillips plans to drill in the deepwater, according to ConocoPhillips’ Al Hirshberg, executive vice president Production, Drilling and Projects.

“In this price environment, we don’t feel it’s prudent to continue allocating capital to new deepwater prospects, so we no longer plan to drill Horus or Socorro,” which the company had planned to drill this year, Hirshberg said. About half of the $700 million capex cut involves costs related to the scuttled Horus and Socorro plans.

1Q2016 production in Canada was 293,000 boe/d compared with 288,000 boe/d in 1Q2015; Alaskan production in the first quarter was 191 million boe/d, compared with 186 million boe/d in 1Q2016.

ConocoPhillips reported a 1Q2016 net loss of $1.5 billion (minus $1.18/share), compared with earnings of $272 million (22 cents) in the year-ago quarter. Excluding special items, adjusted earnings for 1Q2016 were a net loss of $1.2 billion (minus 95 cents/share), compared with adjusted earnings of $222 million (minus 18 cents) in 1Q2015. Special items for the current quarter were related to non-cash impairments in the Gulf of Mexico and United Kingdom and pension settlement expense.