ConocoPhillips will cut another $200 million from its Alaska work program this year, company executives said Thursday morning shortly before oil prices fell to the lowest level in 18 years.
The formal announcement of the spending cut comes about a week after ConocoPhillips told its North Slope drilling contractor, Doyon Drilling, to demobilize its drilling rigs and crews in an attempt to limit the spread of COVID-19.
Doyon Drilling is a subsidiary of the Interior Alaska Native regional corporation Doyon Ltd.
In mid-March ConocoPhillips executives announced an initial $200 million capital spending reduction but the company did not elaborate as to where the spending reductions would come from at the time.
ConocoPhillips spent approximately $1.5 billion on capital projects in Alaska last year.
CEO Ryan Lance said in a conference call that ongoing cuts to oil production worldwide simply have not been enough to offset the demand loss stemming from the economic shutdowns imposed to limit the spread of COVID-19.
“We expect prices over the next few months — they will be weak and they will be volatile,” Lance said.
On April 12, leaders from the world’s top oil producing nations announced a global agreement to cut 9.7 million barrels from daily production in May, or about 10 percent of oil production worldwide. However, vastly oversupplied oil markets have not responded.
The price of Alaska North Slope Crude fell to $16.65 per barrel on Wednesday, according to the Alaska Department of Revenue, the lowest price since January 2002.
ConocoPhillips leaders touted a strong and restructured balance sheet after the 2014-16 oil price downturn with a focus on being profitable at oil prices of $40 per barrel.
“Current prices are well beyond our planning range and we believe these are prudent levers to exercise in the circumstances,” Lance said.
Companywide, ConocoPhillips has reduced spending by $5 billion from prior expectations since early March. The company expects to curtail oil production by about 225,000 barrels per day in the Lower 48 and Canada.
Chief Operating Officer Matt Fox said further estimates on oil production were not available in part because of market uncertainty.
Spokesman John Roper wrote in an email that no layoffs have been announced.
“We continue to monitor the market situation. But at this time, based on our current outlook, we chose to maintain organization capacity so we can resume programs in the future,” Roper wrote.
In addition to ConocoPhillips’ overall $400 million capital investment cut, Oil Search Alaska said in March it would reduce development spending on its large Nanushuk oil project by $70 million this year. BP also said in late March that it was suspending its two-rig drilling program at Prudhoe Bay.
Fox also said the ConocoPhillips’ exploration drilling program on the North Slope was cut short due to prevent an outbreak of the virus in remote drilling camps.
ConocoPhillips Alaska leaders previously said the company planned to drill seven exploration wells in the National Petroleum Reserve-Alaska this winter.
An Alaska spokeswoman did not return questions in time for this story about the company’s ongoing near-term North Slope development projects such as Greater Mooses Tooth-2 and Nuna.
Elwood Brehmer can be reached at firstname.lastname@example.org.
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