Anadarko to cut capital spending by $300 million
Oil explorer based in The Woodlands becomes the first large energy company to make the move as crude prices sag
Anadarko Petroleum Corp. will curb capital spending by $300 million this year amid a volatile market, becoming the first large oil company to signal a pullback amid lower than expected oil prices.
Anadarko Petroleum Corp. said Monday that it plans to curb capital spending by about $300 million this year amid a volatile oil market, becoming the first large oil company to pull back amid unexpectedly low oil prices.
The Woodlands-based oil explorer said it lost $415 million, or 76 cents a share, in the three months from April to June, compared with a loss of $692 million, or $1.36 a share, in the same period last year. Revenue increased from $1.9 billion to $2.7 billion.
Oil prices have languished below $50 a barrel in recent months, disappointing companies and analysts who earlier this year had planned on prices from $50 to $60 a barrel by now. Smaller oil producers in West Texas have already signaled that they would slow activity if prices remained low, and the Energy Department has dropped its forecast of U.S. oil production next year by 1 percent due to the low prices.
“Companies’ abilities to spend depends on their revenues and cash flow, and those are both being hit by the sharp fall in oil prices,” said Lysle Brinker, an analyst at research firm IHS Markit. “We expect this to affect the small guys as well as the big guys.”
Oil prices have fallen 20 percent since reaching a high of $54 a barrel in February, and there’s no hint prices will soon rise much: Global supplies remain abundant and the market is worried that U.S. production is undercutting efforts by OPEC to reduce output by 1.8 million barrels per day.
U.S. oil prices settled Monday at $46.34 a barrel, up 57 cents.
Smaller companies in West Texas’ Permian Basin have already said they’re pulling back. Executives at Midland producers Byrd Operating Co., Fasken Oil & Ranch and Green Century Resources all said recently they were selling property, pulling rigs from the field or backing away from drilling projects.
But small companies are more likely to cut back because they don’t have the cash flow and reserves to help them ride out market swings. Many big companies have capital expenditure budgets
that are largely locked in for the year, said Ruaraidh Montgomery, an analyst at the energy research firm Wood Mackenzie.
“It’s not necessarily the case that what we’ve seen with Anadarko is the start of a trend,” Montgomery said. “Albeit I’m sure there will be other cases where companies exercise some caution and — where they can pull back on spend — I’m sure they’ll do that.”
Anadarko increased capital spending more than 50 percent this year, from $2.9 billion to at least $4.5 billion. The $300 million cut announced Monday represents 7 percent of that, just a “minor adjustment,” Montgomery said.
Al Walker, Anadarko’s chairman and chief executive, said simply that “the current market conditions require lower capital intensity.”
Anadarko was one of the first exploration and production companies to report second-quarter earnings.
Houston-based ConocoPhillips, Cabot Oil & Gas Corp., Irving-based Exxon Mobil Corp. and California-based Chevron Corp. report this week.
Large Houston independent oil companies like Occidental Petroleum Corp., Marathon Oil Corp. and EOG Resources report next week.