Oil and gas giant ConocoPhillips set its 2015 capital budget at $13.5 billion, a 20% decrease from 2014, the company said Monday.
The spending reduction is in line with numerous other US producers in the wake of the November 27 OPEC meeting in which members failed to agree to cut production.
The company cited “lower spending on major projects, several of which are nearing completion, as well as the deferral of spending on North American unconventional plays” as the reason for the capital reduction.
And, while the company plans to defer spending on North American unconventional plays, it did note that development drilling programs in the Eagle Ford and Bakken will contribute to the estimated 3% production growth expected in 2015.
The strategy seems on par with forecasts made by the US Energy Information Administration in its December 2014 Short-Term Energy Outlook released today.
Administrator Adam Sieminski said, "US oil production growth is expected to slow next year in response to lower crude prices, but annual output is forecast to still increase to the highest level since 1972.”
“Continued lower oil prices will make some drilling activity less profitable in both emerging and mature US oil production areas. However, oil prices are expected to remain high enough in 2015 to support new drilling in the major shale areas in North Dakota and Texas, which account for most of the growth in US oil production.”
In addition to the Eagle Ford and the Bakken, ConocoPhillips expects production growth from continuing operations (excluding Libya), major project startups in Canada, Europe and Malaysia, and new production from 2015 major project startups at Eldfisk II, the Australia Pacific LNG (APLNG) Project and Surmont Phase 2.
"We are setting our 2015 capital budget at a level that we believe is prudent given the current environment," said Ryan Lance, chairman and CEO. "We are fortunate to have significant flexibility in our capital program. Spending on several major projects has peaked and we will get the benefit of production uplift from those projects over the next few years. In addition, we have significant identified inventory in the unconventionals, where we also retain a high degree of capital flexibility."
Development drilling programs
Approximately $5 billion is earmarked for development drilling programs compared to the 2014 budget of $6.5 billion. As mentioned previously, in 2015, the Lower 48 development program capital will continue to target the Eagle Ford and Bakken, and deferring significant investment in the emerging North American unconventional plays, including the Permian, Niobrara, Montney and Duvernay.
Approximately $4.8 billion is focused on the company's sanctioned major projects. This represents a significant reduction compared to 2014, which included peak spending at the APLNG and Surmont Phase 2 projects. Funding in 2015 will focus on completion of APLNG and Surmont Phase 2, as well as multiple projects in Alaska, Europe and Malaysia.
Exploration and appraisal
Approximately $1.8 billion is allocated toward the company's exploration and appraisal programs, down slightly compared to 2014. This spending will focus on conventional activity in the US Gulf of Mexico, offshore West Africa and Nova Scotia, as well as unconventional activity in North America.