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.