Big Oil Slashing Spending Amid Low Prices.
Oil prices continue to slide in mid-December, slumping towards another key threshold of $60 per barrel.
Oil prices hit a five-year low on December 10. While many major oil players have gone to lengths to assure markets that they can weather the price downturn – and indeed it is far from clear how long the current price collapse will last – low prices are clearly starting to have an impact on major investment decisions. Drilling permits dropped by 36 percent between October and November, and the number of rigs in operation continues to fall.
Many oil companies are beginning to pare back capital expenditures, reconsidering pouring billions of dollars into expensive projects that may or may not be profitable in the current environment.
ConocoPhillips announced on December 8 that it would slash capital expenditures in 2015 by 20 percent, dropping its spending budget to $13.5 billion. And in a sign that the oil price slump is starting to take a major toll on future investments, ConocoPhillips said that it would “defer significant investment” on its projects that are in their earlier stages, such as its fields in the Montney and Duvernay in Canada, along with its holdings in the Permian basin and the Niobrara.
Related: Who Comes Out On Top After Oil Pandemonium?
BP is also hoping to cut costs. It expects to lay off workers and trim spending, perhaps by as much as $2 billion. It is unclear how much spending the oil major already had planned to cut, as it continues to downsize after steep losses stemming from the Deepwater Horizon disaster in 2010, but a company spokesman said the drop in oil prices “has increased our focus on these activities.” In an investor presentation, BP said that it usually approves new projects when oil prices are at $80 or higher.
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