The U.S. status as a net petroleum exporter is at risk, Bloomberg said this week, as plunging oil prices threaten domestic production. U.S. recently began exporting more petroleum that it imports because of “record shale production in fields such as the Permian Basin.” Bloomberg added, “Now, amid the worst price rout in nearly three decades, American drillers are facing a million-barrel drop in production that could curb U.S. exports and set back the country’s march toward energy independence.” Cailin Birch of Economist Intelligence Unit in London told Bloomberg, “The U.S.’s net exporter days may be numbered.”
Also, Saudi Arabia and Russia, the world’s two largest crude exporters, appear ready to flood the market with discounted oil in a price war. Bloomberg said the surge of inexpensive supply could pose “a secondary blow to shale explorers.”
The events of the week in the industry resulted in spending cuts by majors:
Occidental Petroleum said it will reduce 2020 capital spending to $3.5 billion to $3.7 billion from $5.2 billion to $5.4 billion. Previously Oxy planned to allocate $2.2 billion to Permian Basin with expected production growth of about 6 percent. Production guidance for Permian in 2020 previously was 465,000 to 475,000 boed. Oxy did not give a breakdown for its revised capital program.
Marathon Oil said it is cutting its 2020 capital spending by 20 percent to $1.9 billion to $2.4 billion, including $1.7 billion on drilling, hydraulic fracturing and other field activities. Marathon is suspending drilling and completions in Oklahoma, reducing its presence in Permian Basin to four drilling rigs and one hydraulic fracturing crew, and tightening operations in Eagle Ford and Bakken.
ConocoPhillips sold its Waddell Ranch lease in Permian Basin and also is exiting the DJ Basin in Colorado. The Waddell Ranch lease, acquired in 2006, included the company’s only vertical oil wells in Permian Basin. The company owns numerous leases in west Texas shale plays where it continues to use horizontal drilling and hydraulic fracturing.
Exxon Mobil said it will cut Permian production growth by about 10 percent in the next two years, but will stay with its long-term plan to almost triple output from the basin by 2024. “We’ve got a very challenging short-term margin environment that is now being compounded by the growing economic impact of the coronavirus,” Darren Woods, CEO, said. Exxon said its capital spending in 2020 will not be more than $33 billion – the lowend of its previously announced range.
Chevron promised shareholders a mix of cost-cutting and measured production growth, according to Bloomberg. Mike Wirth, CEO, said returning cash to shareholders is “our No. 1 priority. This doesn’t rely on higher oil prices. It relies on self-help to greater cost efficiency, continued capital discipline, and effective portfolio management.” Permian Basin will be a key play in Chevron’s plan to improve performance – offering more than 20 percent profit for each dollar invested. Production will flatten at 1.2 million b/d by the mid-2020s with capital spending of about $4.5 billion a year. Permian production will eventually account for a third of Chevron’s global output.