Continental Resources Inc and Diamondback Energy on Thursday unveiled drastic cuts to their annual budgets as oil and gas producers look to run a tight ship following the recent plunge in oil prices.
North American shale producers have cut planned expenditures between 25% and 55% on average, as crude prices have plummeted to two-decade lows following a slump in demand due to the coronavirus outbreak and an expected surge in supplies after top producers Russia and Saudi Arabia pledged to pump full bore.
Continental slashed its budget by about 55% to $1.2 billion and expects the cut to knock off less than 5% from its full-year production.
The company also expects to be cash flow neutral under $30 per barrel of U.S. crude. Prices of West Texas intermediate were up 9.8% at $22.36 per barrel at 11:39 a.m. GMT, rebounding from a nearly 25% drop to an 18-year low in the previous session.
Continental also plans to reduce its average rig count to about 3 from 9 in the Bakken shale of North Dakota and to about 4 from 10.5 in Oklahoma.
Diamondback said the cut to budget would be about $1.2 billion at the midpoint, to a range of $1.5 billion to $1.9 billion. The shale producer was among the first to signal it would cut spending and scale back activity, but had not disclosed details then.
The company said on Thursday it had further reduced activity, including a minimum one-month break for all completion crews.
“We are in an unprecedented and uncertain market driven by fear and panic. In this environment where we do not get paid adequately for the product we produce, we will reduce activity and focus on maintaining our financial strength,” Diamondback Chief Executive Officer Travis Stice said.
Top U.S. oil producer Exxon Mobil Corp said on Monday it would make “significant” cuts to spending, while closest rival Chevron Corp has said it was looking at ways to trim expenditure.
The producers are also cutting executive pay and asking suppliers for price discounts on equipment and services.
Shale producer Parsley Energy Inc said on Wednesday it would slash executive pay 50%, the deepest such cut announced so far, and has also asked its suppliers to consider 25% reduction in service pricing.
Canadian Natural Resources Ltd also slashed its full-year capital expenditure budget by about 27% to about C$2.96 billion ($2.03 billion) on Wednesday.