ConocoPhillips Unveils Curtailment Plans
ConocoPhillips reported Thursday that it will voluntarily curtail its production by 225,000 gross barrels of oil per day (bod) in Canada and the Lower 48 United States in response to the oil market downturn.
Until market conditions improve, the company plans to:
- Reduce approximately 100,000 bod of production by May at its Surmont oil sands facility in Alberta, bringing gross output down to 35,000 bod
- Starting next month, initially curtail approximately 125,000 bod gross across its Lower 48 U.S. assets and make future curtailment decisions on a month-to-month basis.
According to ConocoPhillips, the curtailments represent roughly 200,000 barrels of oil equivalent per day net to the company.
“Given ongoing uncertainty, continued market volatility and the potential for both voluntary and involuntary curtailments over the coming months, the company’s previous 2020 guidance items should not be relied upon and further guidance will be suspended,” the firm stated.
ConocoPhillips added that it will dramatically reduce its 2020 cash uses for the second time in a month. On March 18 the firm announced a $2.2 billion decrease in cash uses for the year. Thursday the company raised the figure by $3 billion, bringing the year’s total planned cash usage reduction to $5.2 billion.
“In March, we exercised $2.2 billion of flexibility via reductions in both our planned 2020 capital spending and share repurchases,” remarked Ryan Lance, ConocoPhillips chairman and CEO. “At that time, we stated we would continue to monitor the market and exercise additional flexibility, if warranted. Today we are announcing further capital, operating cost and share repurchase reductions of $3 billion.”
ConocoPhillips provided the following breakdown of the extra $3 billion in cuts:
- Reducing 2020 operating plan capital expenditures by another $1.6 billion, on top of the $700 million cut announced on March 18: The latest action brings current estimated capex for the year down to $4.3 billion. ConocoPhillips stated the approximately 35 percent in 2020 operating plan capex reductions will be applied globally but primarily in the Lower 48, Alaska and Canada.
- Cutting operating costs by approximately $600 million, equating to roughly 10 percent of the initial 2020 guidance: The company now estimates its 2020 operating costs will total $5.3 billion. It added that it sourced the $600 million in cost reductions from lease operating expenses, general and administrative costs and foreign exchange impacts.
- Suspending the company’s share repurchase program.
“These actions reflect our view that near-term oil prices will remain weak, largely due to demand impacts from COVID-19 and continued oil oversupply,” Lance stated in reference to the production and cost reductions. “We are well-positioned with flexibility to take actions that we believe maintain our relative competitive advantages, as well as our ability to resume programs depending on the timing and path of a recovery.”
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