Oil and gas producer Whiting Petroleum on Wednesday reported a surprise quarterly loss, announced a 33% job cut and asset sales as a lack of natural gas infrastructure hits prices.
Construction of new oil and gas pipelines in the United States has failed to keep pace with output, which has more than doubled over the past three years in the country that is now the world’s largest oil producer.
Since gas cannot be stored in tanks or transported by truck or train, any excess has to either burned or re-injected into the ground, burning a hole in producers’ pocket.
In the second quarter, average realized prices for oil fell about 2%, while it dropped 64% for natural gas.
Whiting, which expects the infrastructure constraints to continue through the year, said it had cut about 254 positions and expects to save about $50 million in costs annually.
The company said it will take a one-time charge of about $8 million in the third quarter from the restructuring.
The job cuts come as investors press producers to cut spending and pull back on drilling in favor of share buybacks and dividends.
Whiting also cut its full-year production forecast to between 45 million barrels of oil equivalent (boe) and 46.5 million boe, from its prior forecast of 46.7 million boe to 47.7 million boe, as the company agreed to sell $53 million of non-operated properties, producing 703 boe per day.
Production in the reported quarter rose only about 1% to 127,870 boepd, with oil production being hit by about 3,000 barrels per day from the infrastructure constraints.