ConocoPhillips, the US oil producer, on Thursday announced its second cut to production in less than two weeks with a drop in June output by more than a third — greater than most Opec countries pledged to remove in the cartel’s historic supply deal this month.
The announcement of the cut — by 460,000 barrels a day for a total of 1.3m b/d in June — came as the US’s largest independent oil producer by market capitalisation reported a $1.7bn loss for the first quarter of 2020. This compared with $1.8bn earnings a year earlier.
Falling crude prices triggered by the collapse in oil demand as economies locked down to prevent the spread of coronavirus hit the company, including lowering the value of its near-17 per cent stake in Cenovus Energy, the Canadian oil sands producer.
The company, with a presence across North America’s big oil-producing regions, said it would voluntarily curtail 265,000 b/d in May, including 100,000 b/d from its Surmont oil sands project in Canada.
In June, the cuts would increase to 460,000 b/d, with 260,000 b/d of cuts to be made in the “Lower 48” and the rest in Canada and Alaska. The output reductions in June are more than double the volume announced by Conoco two weeks ago.
“Future voluntary curtailment decisions across our areas of operations will be made on a month-by-month basis,” the company said.
It noted that it expected “some level of additional curtailments from infrastructure constraints, actions from partner-operated assets or government mandates”. Authorities in Texas and North Dakota are considering imposing cuts on producers in their states.
While the company’s first-quarter loss exceeded analysts’ expectations, adjusted earnings of $500m yielded earnings per share of $0.45, more than double the consensus forecast.
Cash from operations of $1.6bn was slightly below expectations. But the company kept its dividend of 42 cents per share. Total distributions to shareholders, including $700m in share buybacks, amounted to $1.2bn.