North American shale firms update 2020 plans

By Luke Geiver | March 17, 2020

In the absence of any further negotiations or agreements from OPEC and Russia to reign in global production, tight shale oil and gas producers based in the U.S. are changing their plans for 2020. Global production is exceeding global demand due in part to decreased transport activity related to the SARS-COVID-2 virus and from the efforts of Saudi Arabia to flood the global market with cheap oil.

Permian

Concho Resources has also decreased its 2020 capital budget plan by roughly 30 percent. “We will monitor and be responsive to market conditions and have flexibility to lower our spending further. In this environment, our priorities are protecting our balance sheet and the dividend, generating free cash flow and preserving our flexibility and opportunity set,” said Tim Leach, chairman and CEO of Concho.

Pioneer Resources will make larger cuts. The Permian mega producer will decrease its 2020 capital budget by 45 percent. At $35/b oil, the company believes it will generate more than $500 million of free cash flow this year. The company will reduce its drilling and frack crews as well.

Bakken

Hess Corp. believes an investment in offshore Guyana should take precedence in the near-term. The major Bakken shale oil producer intends to drop from a six-rig drilling program to a single rig. In addition to the rig subtractions, Hess has added a three year loan worth $1 billion.

Brad Holly, CEO of Whiting Petroleum Corp., said the Denver-based exploration and production firm that is heavily focused on the Bakken, will reduce 2020 capital budget plans by 30 percent until commodities improve. The reduction plans include dropping a rig and a frack crew within the next month. “Increased operating efficiencies and strong well performance underpin this plan,” Holly said, “and we continue to focus on enhancing cash flow by working with our service providers to further lower well costs.”

Haynesville

Goodrich Petroleum, a shale gas producer focused in East Texas, will spend less this year. The company intends to reduce its budget plan by $15 million. For the year, Goodrich still expects to grow shale gas production by roughly 5 to 7 percent compared to 2019 production levels.

Eagle Ford

Matador Resources will reduce its budget by roughly $200 million across its acreage in the Eagle Ford and West Texas. Although the early plan was to run nine drilling rigs, the company will drop to five and also drop one or two frack crews. In the second half of the year and into 2021, Matador has already said it will focus on high-graded, shorter cycle projects.