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Oil Crash Comes Home To Roost: ConocoPhillips To Slash 2015 CapEx By 20%
With every single hollow chatterbox repeating that crashing oil prices are "unambiguously good" it is clearly the case that the opposite is true. And sure enough, the first indications that the crude price crash is about to lead to some serious pain in the US came first yesterday from BP, which announced over the weekend that it would "slash 100s of mid-level supervisor jobs" around the globe, and moments ago, from ConocoPhillips, which added that as a result of plunging oil prices, it would slash its 2015 spending budget by a whopping 20%, cutting off some $3 billion in capital spending mostly involving "less developed project: spending which for those who remember their GDP calculation, means a proportional reduction in the US Gross National Product.
From Houston Chronicle:
BP is cutting mid-level supervisors in its oil production and refining businesses and in back-office corporate functions, the British oil giant's chief financial officer told the Times of London as it is set later this week to lay out plans through the end of this decade.
BP has roughly 10,000 employees and contractors working in Houston, where it has its main U.S. offices.
According to the UK newspaper, BP CFO Brian Gilvary said the company is trimming employees who work in layers above operations. It's unclear whether falling oil prices will prompt BP to accelerate its layoffs, which are part of plans detailed previously to streamline the company. Gilvary said BP has the financial flexibility to "trim into next year if that's what we need in a new world of oil at $70 or $60" a barrel.
Gilvary said falling oil prices could force the company to pare back some projects, either pausing or scuttling them... A spokesman in Houston declined comment Sunday. BP will update investors on its plans through 2020 on Wednesday.
And from Reuters:
ConocoPhillips said it would cut its 2015 capital budget by 20 percent, or about $3 billion, compared with this year, marking the biggest spending cut by a U.S. oil and gas company in dollar terms as global oil prices hit five-year lows.
ConocoPhillips said it would "defer significant investment" on less developed projects in the Montney and Duvernay fields in Canada, the Permian Basin in Texas and the Niobrara shale field, which extends over Colorado, Wyoming, Nebraska and Kansas.
"The announced budget is well below our expectations of $15 billion," Simmons & Co analysts wrote in a note.
ConocoPhillips, which is focusing on the Eagle Ford shale in Texas and North Dakota's Bakken shale, said it will also spend less on major projects, many of which are nearing completion.
Despite lower investment, the company expects its production from fields outside of Libya to rise by 3 percent in 2015. ConocoPhillips forecast 3 to 5 percent growth in October.
"This plan demonstrates our focus on cash-flow neutrality and a competitive dividend, while maintaining our financial strength," Chief Executive Ryan Lance said.
The above may come as a surprise for those who missed out piece "The Imploding Energy Sector Is Responsible For A Third Of S&P 500 Capex." For everyone else, the above "news" is anything but.
So yes: "unambiguously good" for US consumers who decided to blow the tiny amount of cash they save at the pump on trinkets instead of saving the money, but quite unambiguously bad for better-paying energy jobs which are about to be slashed across the board in virtually all US shale projects, leading to a huge adverse impact for the millions of downstream jobs that also sprang up in the past 6 years thanks to the shale miracle, especially since as we reported previously, virtually all jobs created since the trough of the recession have been courtesy of the US energy sector. Jobs which are about to disappear once again.
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It's called a self reinforcing downward spiral.
Nat gas crashing as well. Now $3.63.
A few billion here, a few billion there..
pretty soon you are talking real deflation.
Can I have some moar QE, sir?
Cash it and crash it!
LOL. Cry me a river, Houston.
I got $2.50/gallon gas!!
Sweet. More money for share buy-backs.
Besides, we all knew the "shale oil miracle" was over-hyped and all those wells were months if not weeks from running dry anyway. We just did them a favor by helping them avoid more mal-investment and getting a bunch of people on the unemployment lines that much sooner.
Houston, we have a problem...
Natgas crashing is bad for Russia, good for EU and Ukraine. Economics 101.
Yup
Watch them all divert cash as well curves shallow into buybacks and follow XOM into the hibernation while Americans cheer on the "recovery". Note in 87 1 in 5 (6?) oil corporates blew up. Leverage back then averaged 4.1x, today? exit debt multiples for 2016 are pushing 5.9 at 75/bbl, we are at 63. But that's all good.
http://www.hollywoodreporter.com/news/new-beverly-hills-riyadh-overruns-...
But keep on cheering for cheap oil prices, those Saudi princes buying up Rodeo drive clearly will add a few thousand engineering jobs to the numbers in June.
Let the Saudis have Rodeo drive. They're recirculating petro-dollars!!!
I'm wondering when those Saudi Wahabists will buy GHETTO Drive in big US cities, so they can export their vile religion to desperate people outside the ME.
So far they haven't. Guess that TPTB won't let them.
But wait, BP in the UK charge the most for petrol / gas and it's still averaging around £1.20 per litre (we can no longer afford to pay for it by the gallon here) :-)
So with the plunge in crude, their margins ought to be hugely increased right?
The last time oil plunged to $39 per barrel, we were told it was the strong pound that kept prices at the pump high.... So with the Pound now weak against the Dollar, I wonder what shit they're going to feed us next?
A higher gasoline tax, because oil investors aren't the only people who believe lower gasoline prices are bad for you.
Wouldn't lower oil and gas prices be bad for a QE-soaked fiat system that's tied to said oil?
What would absorb all that liquidity?
Probably time to gas up.
Way more ominous is the coming collapse of what 600 trillion market? (and its quiet offloading onto the inert American taxpayer)
http://theeconomiccollapseblog.com/archives/new-law-make-taxpayers-poten...
And let's not forget Brooksley Born.............
http://www.pbs.org/wgbh/pages/frontline/warning/view/
Put it on the grandkids tab. I'm not paying.
Long puts
The US will pay the price with loss of oil work and oil drilling products. reduction of employment in those fields as well of those working in the fracking industry. It was like an infractructure build up by the nation to add industry and work to the nation's people under-utilized and needing jobs. Who told the Arabs to do this, has a poor knowledge of the unintended consequences and should be fired by President Obama.
Not to worry. We'll retaliate by reversing that regulation allowing exporting of LNG from the US. Should get interesting in the next few months.
The US is part of the problem - allowing leveraging with ZIRP. Personally, I love it when a plan comes together - when economics and the market actually exerts itself the way it is supposed to. I don't feel a bit sorry about this. And don't blame the Saudis or anybody else. OPEC hasn't changd their production quotas - they just haven't bothered to tighten and why should they? This is an American (and Canadian) leverage problem. Assets will exchange hands from the weak to the strong and profitability will resume accordingly - just like it did the last 5 times this happened.
This has nothing to do with economics, and is only pure market manipulation. Just look at all the COMEX rigging that has been documented over the years. This is 2008 redux, only that time oil was ramped up to $145/bbl to tank the economy and bring on the "financial crisis" of 2008. The real goal was to destroy the last vestiges of banking oversight and control put in place in the 30's and constantly weakened after the S&L crisis in the 90's (Glass Steagel repeal anyone?). In 2008/9 a few weak firms were sacrificed, the middle ones got bailed out with taxpayer money, and the strong thrived courtesy of the new bazooka given to the Fed. This was all set up so the Fed could dominate the world money supply.
Fast forward to today, and the currency wars between East & West are now the threat to the Fed. To preserve the Petro Dollar, the West has to take down the threats to the dollar as the world's only reserve currency. That's why oil is being manipulated down to under $60, to punish Russia and her allies which are the only threats to the dollar reserve status. US oil companies and the US economy are just collateral damage in this larger war and will always be bailed out if needed. This is just another engineered push by the West NWO oligarchs to consolidate power just like evey pump and dump scheme that has been done in the last 30 years. S&L Crisis, End of Cold War, Dot Com boom/bust, War on Terror, Financial Crisis, and now Currency Wars. The only goal is to make sure the "enemies" are hurt worse. This is just like the Godfather, but on a world scale.
the threat to the dollar is not other currencies - it is gold. They can take the ruble (or whatever currency) to nothing and eviscerate their economy in the process. Vlad has a fairly stable balance sheet unlike the US whose balance sheet has blown up.
They'll get UI for a while, and then go back to minimum wage, part time jobs. While they're dipping into their savings and 401k's that they built up in their 'glory years' of 2012-2014.
It's a price they're willing to pay, if it means buckling Russia, Syria and Iran. It's full on Financial and Economic war, which is a prerequisite for WW3.
p.s. The US is headed back into Space... NASA just launched Orion. Space IS the ultimate 'high ground', don't ya know? Bullish for the MIC/MISC.
'100's of mid-level supervisor jobs to be cut'....sounds pike a good idea. I never met a mid-level supervisor who wasn't a complete dick who didn't know what he was doing and just made everything 2X as difficult.
above line supervisor till C level-useless way overpaid peter principal addicts who make life in any company miserable and unprofitable
I hear Helicopters in the background preparing for the cash drops...
No. Those are only for alternative energy companies.
He who panics first panics best.
Black oily swan
Another sign of not only a failed administration but also a failed financial system.
what , USSA has the experstise and the best educational system to avoid any issues. SARC
The few friends and relatives I have in Houston are shitting bricks right now. If oil continues its downward spiral, Big H is going to feel tons of pain they tell me.
When the oil crash hit in 1982 there were oilies sitting in the cafetaria in the Oklahoma City Concourse crying the blues. There were watches for sale, cars for sale and girl friends for sale. I'll never forget one guy saying "I thought I'd never suck a d1ck for a million dollars but right now I might sniff around on one a little bit for $10,000."
If you have that guys number, let me know....I have some friends that would like for him to start and give them $10 worth of it...
Oil down roughly half, but gas down only 15-20 percent.
At the pump. Where is buck and a half gas?
Alex coJones, good one.
pocket some, no foul
wink wink
If you turn back the clock to 1999 and compare, oil has gone up more than gasoline in the USA.
These big oil companies are keeping their powder dry..there are going to be a lot of buying opportunities coming soon....all the wildcatters will be for sale and their assets....this will be the washout of independant drillers...
Insurance companies, too. They love fire sales.
In Ohio we still have a lot of farmland owned by insurance companies who bought it for nothing durng the Great Depression. Bastards.
"Weak hand, meat Strong Hand".
I love the smell of oil in the morning. Smells like... Takeovers.
Arnold won't be saying "Oil be back"
Lots more Caddy Escalade commercials.
Gas guzzlers for Christmas to prime the "economy"?
Finally, maybe some relief on Houston area home prices.
Crude and MCD both on the lows down 4%:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=mcd&insttype=&freq=9&show=&time=1
http://www.investing.com/commodities/crude-oil-advanced-chart
...but...but...but... wasn't this the CapEx (in part from the "shale miracle") that was going to provide the future investment to save us all...?
LOL!!
Obama sucks
which announced over the weekend that it would "slash 100s of mid-level supervisor jobs" around the globe
Why didn't they do this before then ?
Um.. I'm on a Conoco Phillips site as I type this.. I just got a deer in headlights look..
I just bought more COP & sold calls, What a gift after my old shares were called away at $80...Good chance to use some dry powder.
GDP = I+C+G +(X-IM)
If I falls because big oil has its nuts in the cracker, cheaper gas will increase C based on CHEAP ENERGY and less government handouts in the form of G spending to support big oil. Will Congress be able to stop that big lobby pressure or insist that taxes,T, diminish on consumers (but not on the 1% or corporates) to feed C ?
G has to T more corporates but also has to increase C, dependent on G, and less direct T of consumer if I gets cold feet.
Meanwhile IM are gonna beat the shit outa X; you can bet on that.
Its all about letters, as GDP is a composite of "fixed" statistics and "liberated" letters of the alpha-bet !
Kapische?
Business investment accounts for only about 12% of US GDP. Oil business investment considerably less than that. Economists estimate that a $10 drop in the price of oil, maintained for one year, adds about 0.3% to US GDP. Low oil prices are good for the US economy.
Shale oil was a stupid idea from the start. Obama can make this all more stupid by barring oil imports.
Low-priced oil good for corporations
U.S. Chevron & Russia’s Lukoil Enter In Joint Project In Nigeria
Russia’s NNK Signs Cooperation Deal With Spain’s Repsol
Nigeria Oil Shipments To U.S. Increase….ExxonMobil Biggest Producer Two Months Straight
Baron's on cheap oil
How does dirt cheap energy produce fewer jobs again?
Investment money dries up because expensive projects are not profitable anymore => no more new drilling => oil patch layoffs.
Because cheap oil helping the economy relies on there actually being an economy in the first place. A quarter of the fucker is nothing more than moving money around and manipulating the stock markets. Then there's government spending which eats another 42%. So there ya have it, unless you are tapped into the govenment money hose, or tapped into wall street, you get jack shit to show for it for the most part. Then there are the "jobs" which are nothing more than selling crap made overseas with the top eating the difference. The actual number of real "jobs" out there shrinks every day and gets replaced with garbage. Either you ae a wall street bullshit artist, or you are hooked up with some fat government contracts, otherwise good luck! Cus virtually everything else that is decent today will be gone tomorrow.
This issue points to another myopia of our current crop of corporate leaders. Tomorrow. None of them seems to think the sun will rise tomorrow. Made a profit last year? "Great," says our not so smart CEO, "give me 5% and the rest to our wonderful shareholders." This makes company share price high (happy shareholders), and the CEO rich, but leaves the company's coffers empty. This tendency to clear out the company treasury may also be a response to the insane LBO schemes of PE firms that seek out such "hidden value," but the outcome is that when a market changing event occurs, driving smaller competitors to the brink, the larger companies have no resources on which to buy them out. In the current situation, the assets of BP and COP are declining in value, so even if they wanted to expand into this crisis, they would have a hard time ginning up the money to make it work. Look, bringing a production well on line likely takes at least 10 years. Do you think oil will be under $70 ten years from now? Not a chance. It very well may be true that at present, the smart thing for these majors to do is to reduce current expenditures, but, were COP and BP to sink capital into acquisitions of smaller companies with good prospects they would very likely be healthier ten years from now. My guess is that others see this opportunity as well and we may be in for a spate of M&A from this sector.