ConocoPhillips cuts output in Canada by 100,000 bpd

HOUSTON • ConocoPhillips Corp. said on Thursday it would slash spending and cut U.S. oil output by about 30 per cent of this year’s target, the largest cut so far by a major shale producer to deal with an unprecedented drop in oil demand.

U.S. oil and gas producers have cut expenses, dismissed tens of thousands of workers and shut-in wells as coronavirus-related lockdowns have curtailed travel and closed businesses, knocking down crude prices by 60 per cent this year.

ConocoPhillips will reduce planned North American output by 225,000 barrels per day (bpd), with the largest cut in its shale output, the company said. Overall, U.S. producers have chopped 854,000 bpd from their goals, according to a Reuters tally of announced cuts.

The Houston-based company said in addition to cutting 125,000 bpd from its mainland U.S. operations, it will cut production in Canada by about 100,000 bpd due to low prices.

The cuts are quickly outpacing even the most recent

U.S. government forecasts. By December, the reductions could lop off 2.15 million bpd from pre-coronavirus targets, consultancy Rystad Energy said on Wednesday. That would put the United States slightly above the curbs sought by the Organization of the Petroleum Exporting Countries this month.

“We are just not going to sell our crude for these kinds of prices,” ConocoPhillips chief executive Ryan Lance on a call with analysts. “I would expect you’re going to see a lot more of this.”

OPEC and its allies, including Russia, this month pledged to cut their May production by roughly 9.7 million bpd to halt an oil glut. They have called on the United States, Norway, Brazil and others to take steps to curb production to support their own energy industries.

The U.S. government cannot mandate cuts by private firms, but rapidly filling U.S. pipelines and storage tanks, combined with falling demand for oil by U.S. refiners, has ConocoPhillips and other producers moving to shut-in wells.

ConocoPhillips last month halved its US$3-billion-ayear share buyback program and on Wednesday suspended purchases altogether. It has emphasized buybacks as its primary means of rewarding shareholders, but will continue to pay a cash dividend.

Conoco is reducing its 2020 spending budget by 35 per cent from its original US$6.6-billion target. The new budget is US$4.3 billion, it said.

U.S. and Canadian producers, generally burdened with higher costs than some of their global competitors, have slashed spending overall by more than US$37 billion, or around 30 per cent.