ConocoPhillips Cuts U.S. Production by 30%

On April 16, ConocoPhillips said it would cut spending and cut U.S. oil production by 30% of its target for this year, the biggest reduction so far to cope with an unprecedented drop in demand.

Novel coronavirus pneumonia has cut costs, fired tens of thousands of workers and shut down oil wells, which has cut travel and closed business due to a cordon related to the new crown pneumonia outbreak. The price of crude oil has fallen 60% this year.

ConocoPhillips said it plans to cut production in North America by 225, 000 barrels a day. U.S. and Canadian producers cut 729000 barrels a day, according to previously announced production cuts.

The cuts will soon exceed the US government's latest forecast. Rystad energy, a consultancy, said on Wednesday that by December, daily production could be 2.15 million barrels less than the pre outbreak target. This will put the US production reduction slightly higher than the output reduction target set by the organization of Petroleum Exporting Countries (OPEC) this month.

"We will not sell crude oil at such a price," Ryan Lance, chief executive of ConocoPhillips, said in a conference call with analysts. "I expect you will see more of this."

OPEC promised to cut its daily output in May by about 9.7 million barrels to stem the oversupply this month. They called on the United States, Norway, Brazil and other countries to take measures to limit production to support their energy industry.

The U.S. government can't force private companies to cut production, but producers have shut down oil wells because of the rapid filling of U.S. pipelines and tanks and the declining demand for oil from refineries.

Some U.S. producers, including Chevron, Western oil and Diamondback energy, have cut spending. ExxonMobil, the largest US oil company, cut spending by 30% this month. Overall, oil companies cut their spending plans by an average of 22% in 2020.

ConocoPhillips said it would cut production in Canada by about 100000 barrels a day due to low prices, in addition to cutting production in the US mainland by 125000 barrels a day.

The company cut its $3 billion a year share buyback plan in half last month and completely stopped buying on Wednesday. The company emphasizes that buyback is the main means of rewarding shareholders, but will continue to pay cash dividends.

ConocoPhillips will cut its 2020 spending budget by 35% from the original $6.6 billion. The new budget is $4.3 billion. The company said the pay increases approved for executives and employees earlier in 2020 would be cancelled and everyone's pay would be at 2019 levels.

Producers in the US and Canada, whose costs are generally higher than those of some other global competitors, have cut overall spending by more than $37 billion, or about 30 per cent. ConocoPhillips said it would not cut production in Alaska and would focus on other North American oil fields. Matt Fox, the company's chief operating officer, said it did not plan to drill any more wells in Texas and North Dakota this year and would stop all fracking operations, the last step in completing the new wells. ConocoPhillips shares fell 3.5 percent Thursday to $31.07, down more than half this year.