ConocoPhillips is vastly reducing its 2016 capital budget by 55% to US$7.7 billion, compared to two years ago, that the Houston-based company says is due to the current environment, which remains challenging with low and volatile prices.
 |
|
Ekofisk area. Image from ConocoPhillips. |
The $7.7 billion will be used for base maintenance and corporate expenditures ($1.2 billion); development drilling programs ($3 billion); major projects ($2.1 billion); and exploration and appraisal ($1.4 billion).
Included in the operating costs is $0.4 billion associated with deepwater exploration, which the company is orchestrating a phased exit as it announced in October.
The $7.7 billion represents a 25% decrease from 2015, and a substantial 55% decrease from 2014.
In the Lower 48, ConocoPhillips will designate $2.6 billion, and will target exploration and appraisal in the Gulf of Mexico, but with the majority being spent on onshore activity.
European operations will see $1.3 billion, which will be used for major projects across the region, development drilling in the Greater Ekofisk Area and base maintenance.
For Canada operations, which include two exploration wells offshore Nova Scotia, ConocoPhillips expects to spend $0.8 billion.
A total of about $1.4 billion will go to the Middle East and Asia Pacific regions.
According to ConocoPhillips, the reductions compared with expected 2015 capital spending of $10.2 billion come primarily from lower major project spending, deflation capture and efficiency improvements.
ConocoPhillips is also expecting to close about $2.3 billion of non-core asset sales, comprised of $0.6 billion from transactions that were closed in the first three quarters of 2015. The remaining $1.7 billion is from definitive deals in place, expected to close either this quarter or in Q1 2016. Production from these assets, of which 80% is natural gas, accounts for more than 70,000 boe/d of 2015 production, ConocoPhillips said.
“We’re setting an operating plan for 2016 that recognizes the current environment, which remains challenging,” Ryan Lance chairman and CEO said. “We are significantly reducing capital and operating costs, while maintaining our commitment to safety and asset integrity. We also retain the flexibility to adjust capital spending in response to market factors. Our plan highlights the actions we accelerated over the past year to position our company for low and volatile prices.”
ConocoPhillips announced its strategic decision to pull out of deepwater exploration before 2017, however, said that deepwater operations may not cease entirely.
In July, the company terminated its order for the already delivered Ensco DS-9 deepwater drillship. The newbuild was scheduled to begin drilling in the Gulf of Mexico in late 2015 in a three-year contract.
Read more:
Subscribe
