ConocoPhillips Inc on Monday announced a sharp cutback in spending on exploration and spending as global oil prices continued to push downward.
The US oil company set capital spending for next year at US$13.5 billion, about 20 percent below this year’s level. Development drilling spending will fall 23 percent to US$5 billion.
The company said the reduction reflects lower spending on major projects that are near completion and also the deferral of spending on “unconventional plays” in North America, generally shale deposits that entail more expensive production and are potentially unprofitable with the low oil prices.
“We are setting our 2015 capital budget at a level that we believe is prudent given the current environment,” ConocoPhillips chairman and chief executive Ryan Lance said in a statement.
“We have significant identified inventory in the unconventionals, where we also retain a high degree of capital flexibility,” he said.
Global oil prices have fallen more than 30 percent since June, as global consumption has grown very slowly while output has jumped.
Production of oil and gas from shale and other unconventional deposits in North America has been a major contributor to the global glut. At the current US$64 a barrel price for the US crude benchmark, West Texas Intermediate, many shale fields could be unprofitable to develop.
ConocoPhillips said that despite the cutback in exploration and production spending, the company will be able to increase production next year by about 3 percent, thanks to new fields just coming on line.
In New York trading on Monday, energy was easily the worst-performing S&P sector, down 3.8 percent, as Brent crude fell to a five-year low on predictions oversupply would keep building until next year. The index is down more than 10 percent for the year, making it the only one of the 10 major S&P sectors in negative territory for the year.
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