As fuel demand has fallen by more than 30%, US and Canadian oil companies are scrambling to reduce output—with Chevron, ConocoPhillips, and Occidental Petroleum accounting for more than half the cuts. In addition, ConocoPhillips and Weatherford International have announced plans to mitigate the market downturn and COVID-19 impacts with a combination of production and financial cuts, headcount and pay reductions, and stock market actions.
ConocoPhillips will make cuts in 2020 operating plan capital expenditures and operating costs sourced from lease operating expenses, general and administrative costs, and foreign exchange impacts; the company is also suspending its share-repurchase program. On a combined basis, these actions represent a reduction in 2020 cash uses of over $5 billion versus original guidance.
The company will also curtail production in Canada and the Lower 48 regions, representing approximately 200,000 BOED.
The ConocoPhillips actions add to changes initially announced on 18 March.
ConocoPhillips chairman and chief executive officer Ryan Lance said, “In March, we stated we would continue to monitor the market and exercise additional flexibility, if warranted. 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.” He added that the company maintains a “strong balance sheet with over $14 billion of liquidity, a diverse portfolio with low capital intensity, and significant financial and operating flexibility.”
ConocoPhillips further discussed its actions on a 16 April market update call; the event is archived and available for replay.
Weatherford International also provided an update today on its expected results for the first quarter of 2020 and announced its intention to delist from the New York Stock Exchange through the filing of a Form 25 with the U.S. Securities and Exchange Commission. It will continue to trade on the OTC Pink Marketplace.
The company has supplemented its cost reduction initiatives with a number of actions, including: temporary pay reductions of 20% for management and the Board of Directors' annual cash retainer; headcount reductions across North American operations of 38% and across the global support structure of 25%; furloughs and pay reductions for remaining employees in the US and in some international locations; a reduction in planned capital expenditures by approximately 50% in 2020 versus 2019 levels; and a consolidation of geographic and product line structures.
In a statement, Weatherford said that the impact of the pandemic and recent actions by producing nations have had an unprecedented disruption on the supply/demand equation for oil, resulting in a decline in commodity prices and reductions to the capital spending plans of exploration and production companies. In this backdrop, the company is evaluating options to improve liquidity and address its long-term capital structure.
The company added that despite the challenging environment, its financial results improved during the first quarter of 2020 due to operational and cost-reduction initiatives.
