More shale drillers slash production after oil rout slams earnings
U.S. shale producers Continental Resources Inc and Callon Petroleum Co joined their peers in cutting production to cope with a rout in oil prices as the coronavirus crisis sapped demand for fuel.
The historic drop in oil prices last month sent shockwaves through the energy sector, forcing producers to drastically cut spending and scale back activity globally.
North American oil companies are on course to cut roughly 1.7 million barrels per day by the end of June, according to a Reuters analysis of U.S. state and company data.
Continental, controlled by oil billionaire Harold Hamm, has cut 70% of its May oil output, more than double of what it had planned earlier, and expects to spend between 3% and 5% below the revised annual budget of $1.2 billion.
Hamm, an ally of U.S. President Donald Trump, has argued that states should mandate production cuts similar to big oil-producing nations, called for a ban on Saudi imports and investigations into last month’s fall in U.S. crude futures to minus $40 a barrel.
Reuters reported last month that Continental had stopped all drilling in North Dakota and issued a force majeure notice, an action typically reserved for situations out of a company’s control, such as war or natural disasters, saying it could not deliver to customers.
The company lost $186 million in the most recent reported quarter, its worst quarterly performance in four years, and it suspended its financial forecasts for the rest of the year.
Hamm’s views against hedging future production opened Continental to greater losses than its rivals. Hedges offer some protection to oil companies from the wild swings in crude prices by guaranteeing a set price for part of their production.
The company said it would reduce current operating rigs to four from five by the end of 2020, marking an 80% reduction from the beginning of the year.
Separately, Permian-focused Callon said it had shut in about 1,500 gross barrels per day (bpd) through April and expects it to reach over 3,000 gross bpd during May. June volumes are currently under evaluation.
Callon also suspended its full-year outlook and said it has halted all completion activity in April and was moving to only one active drilling rig by mid-May.
Reuters reported in April that Callon had hired advisers to restructure its debt after the oil plunge soured its takeover of Carrizo Oil & Gas.
Source: Reuters (Reporting by Arunima Kumar and Shanti S Nair in Bengaluru; Editing by Ramakrishnan M. and Sriraj Kalluvila)