April 16, 2020 / 1:24 PM / 4 months ago

CORRECTED-UPDATE 4-ConocoPhillips cuts U.S. oil output by 30%, largest so far

(Corrects total North American output cuts to 729,000 bpd, not 854,000 in third paragraph)

By Jennifer Hiller and Arathy S Nair

HOUSTON/BANGALORE, April 16 (Reuters) - ConocoPhillips said on Thursday it would slash spending and cut U.S. oil output by about 30% of this year’s target, the largest cut so far by a major shale producer to deal with an unprecedented drop in oil demand.

U.S. oil and gas producers have cut expenses, dismissed tens of thousands of workers and shut-in well as coronavirus-related lockdowns have curtailed travel and closed businesses, knocking down crude prices by 60% this year.

ConocoPhillips will reduce planned North American output by 225,000 barrels per day (bpd), with the largest cut in its shale output, the company said. Overall, U.S. producers have chopped 729,000 bpd from their goals, according to a Reuters tally of announced cuts.

The cuts are quickly outpacing even the most recent U.S. government forecasts. By December, the reductions could lop off 2.15 million bpd from pre-coronavirus targets, consultancy Rystad Energy said on Wednesday. That would put the United States slightly above the curbs sought by the Organization of the Petroleum Exporting Countries this month.

“We are just not going to sell our crude for these kinds of prices,” ConocoPhillips Chief Executive Ryan Lance on a call with analysts. “I would expect you’re going to see a lot more of this,” Lance said.

OPEC and its allies, including Russia, this month pledged to cut their May production by roughly 9.7 million bpd to halt an oil glut. They have called on the United States, Norway, Brazil and others to take steps to curb production to support their own energy industries.

The U.S. government cannot mandate cuts by private firms, but rapidly filling U.S. pipelines and storage tanks, combined with falling demand for oil by U.S. refiners, has ConocoPhillips and other producers moving to shut in wells.

Other U.S. producers including Chevron Corp, Occidental Petroleum Corp, and Diamondback Energy Inc have whacked spending. The top U.S. oil company, Exxon Mobil Corp, this month slashed its spending 30%. Overall, oil companies have pulled back 2020 spending plans by an average of 22%.

ConocoPhillips said in addition to cutting 125,000 bpd from its mainland U.S. operations, it will cut production in Canada by about 100,000 bpd due to low prices.

The company last month halved its $3 billion-a-year share buyback program and on Wednesday suspended purchases altogether. It has emphasized buybacks as its primary means of rewarding shareholders, but will continue to pay a cash dividend.

Conoco is reducing its 2020 spending budget by 35% from its original $6.6 billion target. The new budget is $4.3 billion, it said.

U.S. and Canadian producers, generally burdened with higher costs than some of their global competitors, have slashed spending overall by more than $37 billion, or around 30%.

Conoco said it will not cut production in Alaska, but will focus cuts on other North American fields.

It does not plan to complete any more wells in its Texas and North Dakota this year and is halting all hydraulic fracturing, said Matt Fox, chief operating officer, the final step to completing new wells.

Shares, which fell 2.9% to $31.27 on Thursday, have lost half their value so far this year. (Reporting by Jennifer Hiller in Houston, Arathy S Nair in Bengaluru; Editing by Sriraj Kalluvila and Marguerita Choy)

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