More U.S. oil producers slash budgets amid price rout
By Arathy S Nair and Arunima Kumar (Reuters) - Devon Energy , Apache Corp and Murphy Oil Corp on Thursday became the latest North American oil producers to slash capital spending and drilling plans as crude prices tumble and pressure on businesses intensifies.
By Arathy S Nair and Arunima Kumar
(Reuters) - Devon Energy
Oil producers have been scaling back spending since the last crash in 2014, but the coronavirus outbreak and the launch this week of a price war between Saudi Arabia and Russia threatens to push U.S. crude
Apache on Thursday slashed its dividend by about 90%, cut its 2020 capital investment plan by more than 37% and reduced drilling activity in Egypt and the UK North Sea.
In a telling move, the company also plans to stop drilling in the Permian, America's largest shale field that also has one of the lowest production costs.
Devon cut its spending by about 30% from its earlier forecast, while Murphy Oil slashed its budget by 35% at the midpoint and said it would delay some U.S. Gulf of Mexico projects and development wells.
Brent crude fell about 6% to $33.67 on Thursday following the imposition of surprise travel curbs by U.S. President Donald Trump to halt the spread of the virus. The United Arab Emirates also followed Saudi Arabia in promising to raise oil output to a record high in April.
U.S. crude fell to as low as $30.99 a barrel, far below the low $40s that shale players need to cover their costs.
Analysts at Evercore said this week that they expect global exploration and production budgets to fall nearly 16% this year, compared to an earlier forecast for a 2% growth. They expect spending to fall about 30% in North America, with rig counts declining more than 25%.
Producers may face more pain this time than in the 2014 downturn when the industry benefited from an expanding global economy. The retrenchment then cut more than 50% from North America exploration and production budgets and 25% abroad.
Thursday's moves follow reductions by Occidental Petroleum Corp
U.S. independent producer Marathon Oil Corp
Encana, now Ovintiv Inc
"U.S. E&Ps are being tested existentially, fundamentally, pandemically, financially, politically," analysts from brokerage Cowen said in a note, adding they expected U.S. oil output to be down by an average of 530,000 barrels per day by the fourth quarter.
Shale firms Diamondback Energy Inc
EOG Resources Inc
With debt payments looming for many producers, David Smith, senior vice president at financial advisory firm Mercer Capital, said the current price environment may lead to the next round of oilfield service bankruptcies.
(Reporting by Arunima Kumar, Shariq Khan, Shanti S Nair and Arundhati Sarkar in Bengaluru; Additional reporting by Aishwarya Venugopal; Writing by Arathy S Nair; Editing by Sriraj Kalluvila)
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