ConocoPhillips will further cut $ 200 million from its Alaska work program this year, company executives announced Thursday before oil prices drop to 18-year low.
The official announcement of the spending cut comes about a week after ConocoPhillips told its north slope drilling contractor, Doyon Drilling, to demobilize its rigs and crews to limit the spread of COVID-19.
Doyon Drilling is a subsidiary of the regional interior company Alaska Native Doyon Ltd.
In mid-March, ConocoPhillips executives announced a first reduction in capital spending of $ 200 million, but the company did not say where the spending cuts would come from at the time.
ConocoPhillips spent approximately $ 1.5 billion on capital projects in Alaska last year.
CEO Ryan Lance said in a conference call that ongoing cuts in oil production around the world have simply not been enough to compensate for the loss of demand resulting from economic closings imposed to limit the spread of COVID-19 .
“We anticipate prices in the coming months – they will be low and volatile,” said Lance.
On April 12, leaders of the world’s major oil-producing countries announced a global agreement to cut daily production in May by 9.7 million barrels, or about 10% of global oil production. However, the largely oversupplied oil markets have not responded.
The price of crude oil on the northern Alaskan slope fell to $ 16.65 a barrel on Wednesday, according to the Alaska Revenue Department, the lowest price since January 2002.
ConocoPhillips executives boasted of a solid and restructured balance sheet after falling oil prices in 2014-16, focusing on oil price profitability of $ 40 per barrel.
“Current prices are well beyond our planning range and we believe these are prudent levers to exercise under the circumstances,” said Lance.
Company-wide, ConocoPhillips has cut spending by $ 5 billion from previous expectations since early March. The company plans to reduce oil production by about 225,000 barrels per day in the Lower 48 and in Canada.
COO Matt Fox said new estimates for oil production were not available in part due to market uncertainty.
Spokesman John Roper wrote in an email that no layoffs have been announced.
“We continue to monitor the market situation. But right now, based on our current outlook, we have chosen to maintain the capacity of the organization so that we can resume programming in the future, “wrote Roper.
In addition to reducing ConocoPhillips’ overall capital investment by $ 400 million, Oil Search Alaska said in March that it will cut development costs for its major Nanushuk oil project by $ 70 million this year. In late March, BP also announced the suspension of its two-device drilling program at Prudhoe Bay.
Fox also said that ConocoPhillips’ exploration drilling program on the north slope had been halted due to the prevention of a virus epidemic in remote drilling camps.
ConocoPhillips Alaska executives previously said the company plans to drill seven exploration wells in the Alaska National Oil Reserve this winter.
An Alaska spokesperson did not return questions in time for this story about the company’s short-term north slope development projects, such as Greater Mooses Tooth-2 and Nuna.
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