Big oil company: 2019 spending stays flat
ConocoPhillips sees bear market outlook
ConocoPhillips said Monday it will keep its 2019 capital spending flat, with oil prices down more than 30 percent from the beginning of October and bearish outlooks still leading the market.
While OPEC and Russia reached a deal to cut oil production on Friday to avoid a global glut and another potential bust, the reigning oil market sentiment as the week started was that the cuts may not be enough to balance supplies as demand weakens and trade wars threaten to continue. As such, the U.S. oil benchmark fell to $51 a barrel, a loss of $1.61 for the day.
ConocoPhillips set its capital spending at $6.1 billion for next year. For 2018, the Houston oil and gas producer initially budgeted for $5.5 billion but eventually hiked that amount to $6.1 billion.
The company also said it was planning for a $3 billion share repurchase program next year and will pump up to 1.35 million barrels of oil equivalent a day, an 8 percent increase from this year.
But not everyone is following ConocoPhillips’ playbook. New York-based explorer and producer Hess Corp. said Monday it will increase its 2019 capital spending by more than one-third from $2.1 billion to $2.9 billion. And, last week, the nation’s second-largest energy company, Chevron Corp., announced a 9 percent capital spending increase.
ConocoPhillips Chairman and Chief Executive Ryan Lance touted his company’s conservative approach as key to keeping spending in check and remaining profitable even when oil prices are low.
“We no longer think of our value proposition as merely disciplined. We view it as the new order,” Lance said. “We are running our business for sustained through-cycle financial returns, which is necessary for attracting investors back to the E&P sector.”
ConocoPhillips said it will focus on Texas in the Eagle Ford Shale and the Permian Basin, as well as western Canada, Alaska and the emerging portion of the Austin Chalk play in Louisiana. About $3.1 billion — or more than half of the capital budget — is allocated for the Lower 48, led by Texas.
ConocoPhillips’ announcement comes just after the Organization of the Petroleum Exporting Countries, Russia and other allies agreed to cut their combined outputs by 1.2 million barrels a day for the first half of 2019.
The agreement was a big win for the so-called OPEC+ group to help the world avoid a global oil price crash. The U.S. oil benchmark has fallen from $76 a barrel in early October to just above $51. The deal may keep oil from falling well below $50 a barrel, but it may not be enough to push prices up for now, especially with OPEC+ declining to release many details and some question marks about whether every participating nation will hold up its end of the cuts.
The U.S. — led by the booming Permian — is churning out an estimated record of 11.7 million barrels a day and exporting more than ever, while Saudi Arabia and Russia both pumped out more than 11 million barrels daily in November. A feared global economic slowdown has combined with all of these factors to create an anticipated oil oversupply in 2019 that even the OPEC+ agreement may not be able to prevent, especially with U.S. output rising.