The three biggest U.S. oil explorers to post earnings so far are bracing for another year of deep spending cuts as the slump in energy markets shows no signs of abating.
Hess Corp, Occidental Petroleum Corp. and , reported third-quarter losses as free-falling crude and natural gas prices choked cash flow, halted drilling projects and exacted billions of dollars in writedowns as once- prized oil fields dwindled in value.
For the $1.9 trillion-a-year oil industry, the bad news is just beginning. ConocoPhillips, the third-largest U.S. crude producer, is expected to post its first third-quarter loss in more than a decade on Thursday. The Houston-based company’s bigger rivals, Exxon Mobil Corp. and Chevron Corp., follow with their earnings the next day.
Oil executives are halting expensive projects that won’t bring returns for years and shunning peripheral opportunities seen as too much of a gamble after crude’s fall to $45 a barrel.
“We don’t think it makes sense to accelerate production in this environment,” Hess CEO John Hess said during a conference call with investors and analysts Wednesday.
Occidental reported a third-quarter loss of $2.61 billion, or $3.42 a share, on sliding crude prices, writedowns of oil-field values and a slump in production tied to the spinoff of the company’s California business. The result compared with net income of $1.21 billion, or $1.55 per share, a year earlier, Houston-based Occidental said in a statement Wednesday.
Excluding some one-time items, the per-share gain was 3 cents above expectations. Estimates had ranged from a 15-cent loss to a 14-cent gain among the 27 analysts surveyed by Bloomberg.
Occidental’s crude and natural gas output fell after the company spun off its West Coast holdings into a separate company in late 2014.
A glut of North American supply has deflated the benchmark U.S. oil price by 52 percent to an average of $46.50 a barrel during the quarter from $97.25 a year earlier. As the crash dried up cash for exploration, Occidental reduced its drilling budget by 20 percent in the quarter to $1.2 billion, according to the statement.
U.S. crude climbed $2.74 a barrel, to $45.94, in New York on Wednesday. Brent crude, which is used to price international oils, rose $2.24, or 4.8 percent, to $49.05 in London.
“They’re grinding down capex,” said Tim Rezvan, an analyst at Sterne Agee & Leach Inc. Curtailing capital expenditures on new wells and other projects will help conserve cash to pay dividends, he said.
Occidental, the second-largest oil producer in Texas, is quitting the Williston Basin, an area in the northern Great Plains that includes the Bakken Shale formation, and scaling back operations in the Middle East and North Africa, CEO Stephen Chazen said in the statement.
Anadarko recorded a $2.24 billion loss as lower energy prices wiped out $1 billion in value from its oil and gas fields. The company is focused on cutting costs and selling assets to augment its cash position. Anadarko said it has achieved cost reductions of as much as 15 percent in some areas and raised $2 billion from selling properties. In March, the company said it would cut spending in Colorado by 25 percent to $1.8 billion.
The company, based in the Houston suburb of The Woodlands, plans to restrict capital spending to match cash inflows in 2016, CEO Al Walker said during a conference call with investors and analysts on Wednesday.
Hess plans to cut spending by about 27 percent next year after its oil and natural gas business lost more than $2 million a day during the third quarter. Hess estimated its 2016 capital budget will fall to between $2.9 billion and $3.1 billion from $4.1 billion this year, according to a statement from the New York-based company on Wednesday.
