One month after it cut expenditures by almost one-third, Houston’s Noble Energy Inc. has joined a growing group of peers in reducing even more spend, with the hit mostly to U.S. onshore operations, while it furloughs employees and cuts salaries in response to the never-ending impacts from the Covid-19 pandemic and sharp decline in oil and gas demand.
The global exploration and production (E&P) company last month reduced capital expenditures (capex) by $500 million, or nearly 30%, to $1.1-1.3 billion. Capex now has been reduced by another 20%, or $350 million, to $800-900 million.
“Recent events have had an unprecedented and unpredictable impact on the global economy and the oil and gas industry,” said CEO David L. Stover. “We are acting quickly and aggressively to confront today’s economic challenges with a focus on Noble Energy’s financial strength and to position the company to improve shareholder value.”
An employee-based furlough program, combined with a part-time work status, would impact more than 30% of Noble’s U.S. workforce to align costs with reduced activity levels. “These programs are designed to be temporary until higher activity levels are justified,” management said.
An additional $125 million in cash cost savings should reduce outlays this year by more than $175 million versus the original plan. The quarterly dividend also was cut to 8 cents/share.
Noble is able to “flex spending as appropriate,” Stover said. “The actions taken to date are expected to generate more than $1 billion in annualized cash savings, and we will continue to remain agile to ensure the long-term success of the business.”
The incremental capital spending reductions by Noble are primarily to the U.S. onshore business, with expenditures deferred in the Permian and the Denver-Julesburg (DJ) basins “until commodity prices improve.
The updated Lower 48 capex plan now is set at $600 million, with $250 million earmarked for international/offshore.
Following the adjustments, one rig would run in the DJ “through the remainder of the year,” management said. “Completion activities are being temporarily deferred, maintaining flexibility to resume completions late in the year based upon economic and commodity conditions.”
Also effective May 1, Stover’s salary has been cut by 20%, with senior officers taking a 15% reduction and vice president salaries reduced by 10%. In addition, the board members are taking 25% less in cash retainers.
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Tenaris SA, which provides oilfield steel pipes, is reducing its U.S. workforce by about 900 people and temporarily closing or reducing activities in Arkansas, Texas, Ohio and Pennsylvania because of the “ abrupt, sharp decline in the price of oil, and subsequent decrease in market activity.”
Operations at the Koppel and Ambridge facilities in Pennsylvania were suspended on March 31, while the Brookfield, OH, threading plant is to suspend operations on Friday (April 17).
Tenaris also is reducing the workforce as of Friday at its threading plant in Baytown and in the Hickman, AR, welded pipe plant.
“These are extraordinary times for our sector that require us to implement difficult, short-term measures to temporarily lean our operations to maintain a long-term solid position to serve our customers,” said Tenaris US President Luca Zanotti.
Given the ongoing coronavirus outbreak, Tenaris said it would offer employees who are laid off three months of health insurance with the possibility of extending it should the outbreak persist.
Tenaris said as its TuboCaribe facility in Colombia has become “more susceptible” to the spread of Covid-19, it is implementing a community-based plan to bolster medical institutions and reduce food insecurity.
The facility in Qingdao, China, also became the first in the Tenaris industrial network to introduce mandatory temperature scans, restrict employee gatherings, map out workstations to enforce social distancing and disinfect high-risk areas at least four times per day.
Operators also are reporting the spread of coronavirus in the workplace, including in the Gulf of Mexico (GOM). The National Ocean Industries Association reportedly has tracked at least 29 confirmed Covid-19 cases on seven offshore facilities. There are up to 16,000 employees working in the U.S. offshore at any one time.
The Brazilian National Agency of Petroleum, Natural Gas and Biofuels, the federal agency linked to the Ministry of Mines and Energy, which regulates the energy sector, told Reuters that there were at least 126 confirmed cases of coronavirus among the oil and gas workforce, including 74 working on offshore platforms.
Meanwhile, ExxonMobil said Wednesday it has increased production for medical professionals, with specialized polypropylene monthly production increased by 1,000 metric tons, enough to make 200 million masks or 20 million gowns. It also has boosted its monthly isopropyl alcohol production by up to 3,000 metric tons, enough to make 50 million bottles of hand sanitizer.
“We’re increasing our manufacturing capabilities to meet this critical need to help keep doctors, nurses and first responders healthy and safe,” said ExxonMobil Chemical Co. President Karen McKee. “Our team has been working around the clock, applying our engineering and technical know-how and working with our customers to make this happen. We’re committed to doing our part to support the global response to the Covid-19 pandemic.”
The additional polypropylene would be made at sites in Baytown, TX, and Baton Rouge, LA, as well as in Singapore. Production of isopropyl alcohol, also known as rubbing alcohol, is being maximized at the Baton Rouge site.
ExxonMobil also is supporting development of products to help in the pandemic response. In work with the Global Center for Medical Innovation, ExxonMobil earlier this month announced multi-sector and joint-development projects to redesign and manufacture reusable personal protection equipment, such as face shields and masks, for health care workers.
The center is awaiting approval from the U.S. Food and Drug Administration for a new face mask design that has a replaceable cartridge system that includes a filtration fabric. When approved, production could begin immediately and produce per hour as many as 40,000 masks and filter cartridges.
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