ConocoPhillips cuts capex to $11.5bn/yr thru 2017

OREANDA-NEWS. The world's largest independent oil and gas producer ConocoPhillips is cutting its capital expenditure (capex) budget by nearly 30pc to \\$11.5bn a year through 2017 as the plunge in crude prices squeezes cash inflows.

"We now believe it is prudent to position the company for lower, more volatile prices for the foreseeable future," chief executive Ryan Lance said.

Setting a fixed capex rate for three years may give the company a better handle on managing its finances through a volatile crude market that saw prices plunge back to six-year lows this week after recovering in February. Oil has dropped nearly 60pc since June amid rising supplies, triggered in part by the US shale boom, and weak demand in key consumers such as China and Europe.

ConocoPhillips is among the first US independents to announce capex cuts spread over the next few years, but it joins majors such as Chevron which plans to pare capex to under \\$30bn by 2017 from \\$35bn this year.

Other US independents may come forward with similar longer-term cuts as resilient US output and steady exports from top members of the producer group OPEC including are all pointing to prices remaining under pressure through this year at least.

The investment plan, which is a cut from the \\$16bn a year planned earlier, is aimed "at the company's priorities of a compelling dividend and cash flow neutrality in 2017 and beyond," ConocoPhillips said. Under the revised plan, however, the company expects spending on development drilling to increase as major projects in Canada, Malaysia and Australia start up or near completion and the outgo on them declines.

ConocoPhillips reiterated its output growth target of 2-3pc for this year, which was lower than the 3pc it had forecast in December and the 4pc posted in 2014. It expects output to increase to 1.7mn b/d of oil equivalent (boe/d), excluding Libya in 2017. That compares to a first-quarter 2015 output target of 1.57mn-1.6mn boe/d announced in January.