ConocoPhillips curtails U.S., Canadian production, extends spending cuts

HOUSTON – ConocoPhillips announced that it is taking further actions to respond to the oil market downturn. These follow initial actions announced on March 18.

“In March we exercised $2.2 billion of flexibility via reductions in both our planned 2020 capital spending and share repurchases,” said Ryan Lance, chairman and chief executive officer. “At that time, we stated we would continue to monitor the market and exercise additional flexibility, if warranted. Today we are announcing further capital, operating cost and share repurchase reductions of $3 billion. We also announced our intention to defer production where we have a compelling economic reason to do so. These actions reflect our view that near-term oil prices will remain weak, largely due to demand impacts from COVID-19 and continued oil oversupply. We are well-positioned with flexibility to take actions that we believe maintain our relative competitive advantages, as well as our ability to resume programs depending on the timing and path of a recovery.”

Today’s announced actions include:

• An additional reduction in 2020 operating plan capital expenditures of $1.6 billion, bringing the current estimate to $4.3 billion. Including our previously announced reduction of $0.7 billion, this represents a total reduction in operating plan capital expenditures of $2.3 billion, or approximately 35 percent, compared to the 2020 announced guidance. These reductions are sourced from across our global portfolio, primarily focused on Lower 48, Alaska and Canada areas where we have the highest levels of flexibility.
• A reduction in operating costs of approximately $0.6 billion, representing roughly 10 percent of the initial 2020 guidance. This brings the current estimate to $5.3 billion. These reductions were sourced from lease operating expenses, general and administrative costs and foreign exchange impacts.
• The company’s share repurchase program has been suspended.
• On a combined basis, the cumulative capital, operating cost and share repurchase actions represent a reduction in 2020 cash uses of over $5 billion versus original operating plan guidance.
• The company also announced it will elect to curtail production in Canada and the Lower 48 regions until market conditions improve.
• At Surmont, the company is currently cutting back production due to low Western Canada Select prices. By May, the company expects to reduce production by approximately 100,000 barrels of oil per day (BOD) gross to 35,000 BOD gross.
• In addition, beginning in May, the company plans to begin curtailing production across its Lower 48 region. Initially, the company expects to curtail about 125,000 BOD gross. Curtailment decisions will be made on a month-to-month basis, and are subject to operating agreements and contractual obligations.
• These announced curtailments represent approximately 200,000 barrels of oil equivalent per day (BOED) net to the company.
• Given ongoing uncertainty, continued market volatility and the potential for both voluntary and involuntary curtailments over the coming months, the company’s previous 2020 guidance items should not be relied upon and further guidance will be suspended.

Lance continued, “Over the past few years we worked very hard to position our company with significant flexibility across our capital, operating, distribution and balance sheet channels. We entered this downturn with several competitive advantages, including a very strong balance sheet with over $14 billion of liquidity, a diverse portfolio with low capital intensity, and significant financial and operating flexibility. We believe this puts us in an advantaged position to take rational, economic actions, including voluntary curtailments that align with reasoned views of the market. With today’s actions we have exercised a total of over $5 billion of flexibility compared to our 2020 plan, while retaining additional flexibility, if needed. We’re doing the right things to protect shareholder value during this downturn, while maintaining our ability to create long-term value for shareholders when market conditions recover.”