Prolonged oil slump sparks second wave of cuts to 2016 budgets
By Swetha Gopinath and Amrutha Gayathri
Feb 7 (Reuters) - Less than two months into the year, the top U.S. shale oil companies have already cut their budget for 2016 a second time as the relentless drop in oil prices continues to erode their cash flow.
With oil prices firmly wedged in the low $30-per-barrel range, oil producers are deferring spending on new wells and projects.
"Companies' language has shifted towards preserving balance sheets and cash, and keeping expenditure within cash-flows, which means that budgets are going to fall further," said Topeka Capital Markets analyst Gabriele Sorbara.
Eighteen of the top 30 U.S. oil companies by output have so far outlined their spending plans for 2016. They have reduced their budget by 40 percent on average, steeper than most analysts' expectations, according to a Reuters analysis.
These 30 companies had, on average, lowered their spending plans for 2016 by more than 70 percent last year.
Some such as Hess Corp and ConocoPhillips, who had already planned to spend less this year than in 2015, have now further cut their capital expenditure targets. Others are expected to follow suit.
But, is there room for further cuts?
While reduced prices for oilfield services and increased efficiencies have helped companies scale back spending, many industry experts say there may not be room for further cuts. Continued...