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More U.S. oil producers slash budgets amid price rout

Devon Energy, Apache Corp and Murphy Oil Corp became the latest in a string of North American oil producers to slash their capital spending and drilling plans as crude prices tumble.

Oil producers have been scaling back spending since the last price crash in 2014, and the latest cuts come as the coronavirus outbreak crimps demand and a price war between top producers Saudi Arabia and Russia threatens to flood the oil markets, pushing U.S. crude to about $30 a barrel.

Apache on Thursday slashed its dividend by about 90%, cut 2020 capital investment plan by more than 37%, and said it would stop producing in Texas’ Permian basin and reduce drilling activity in Egypt and the UK North Sea.

Devon said it would cut its spending by about 30% from its earlier forecast, while Murphy Oil slashed its budget by 35% at the midpoint and said it would delay some U.S. Gulf of Mexico projects and development wells.

Crude fell about 6% to $33.67 on Thursday following surprise travel curbs imposed by U.S. President Donald Trump in an attempt to halt the spread of coronavirus and after the United Arab Emirates followed Saudi Arabia in promising to raise oil output to a record high in April.

U.S crude was trading down more than 6% at $30.99 a barrel, well below the low $40s that shale players need to cover their costs.

Earlier this week, Occidental Petroleum Corp announced it would slash its dividend and capital expenditure, while Chevron Corp became the first oil major to say it was looking at ways to cut spending that could lead to lower near-term oil production.

U.S. independent producer Marathon Oil Corp and Canadian oil-sands company Cenovus Energy Inc have also promised to cut spending by about 30% from a year earlier.

Shale firms Diamondback Energy Inc, Parsley Energy Inc, Matador Resources Co, Canada’s Meg Energy and offshore driller Talos Energy all unveiled plans to cut spending.

EOG Resources Inc said it was evaluating its drilling activity and that it was in the process of finalizing specific plans.

Analysts at Evercore said this week that they expect global exploration and production budgets to fall nearly 16% year over year, compared to their original forecast which called for a modest growth of 2%.

They expect spending to fall about 30% in North America, with rig counts declining more than 25%.
Source: Reuters (Reporting by Shariq Khan, Shanti S Nair and Arundhati Sarkar in Bengaluru; Writing by Arathy S Nair; Editing by Sriraj Kalluvila)

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