Murphy Oil Corp. of El Dorado said Thursday that it would cut 2020 capital expenditures by about 35% “given current market conditions and recent commodity price volatility,” which have driven the price of oil down by as much as 20%.
The publicly traded oil company said in a news release that its revised 2020 budget is about $950 million, a reduction of about $500 million from the midpoint of its previously announced range of $1.4 billion to $1.5 billion.
The company said it would release more details of its revised plan later.
“Under current conditions, we believe this capital reduction program allows for financial flexibility and preservation of our longstanding dividend,” President and CEO Rogers Jenkins said. “As always, we will not sacrifice safety in our efforts to reduce costs across all our assets, as it remains a core value within Murphy.”
In a statement, Murphy Oil said it would delay certain projects and development wells in the Gulf of Mexico, postpone well-drilling starts at two operated exploration wells and release operated rigs and fracking crews in the Eagle Ford Shale, where it would stop operations for the second half of the year. The company said it would also defer completing wells in the Tupper Montney, a natural gas play in northeast British Columbia.
The company also sought to assure investors of its financial position.
“We have persevered through multiple commodity price cycles in our 70 years of corporate history, and want to provide reassurance that we are focused on a strategy that protects the business, the balance sheet and our liquidity, while maintaining optionality for additional adjustments given the unstable environment,” Jenkins said. “Murphy has an ample liquidity position as of year-end 2019 between its undrawn $1.6 billion senior unsecured credit facility due November 2023 plus cash on hand, along with other sources of liquidity arising in the normal course of business. Further, we have no debt maturities until June 2022.”
The moves comes amid a dramatic fall in oil prices after Saudi Arabia announced plans over the weekend to raise production despite a decline in demand because of the spreading coronavirus. On Monday, oil prices fell about 20%. On Thursday, the price was down about 5.8% to $31.05 per barrel.
Other U.S. oil producers said they would also cut or consider cutting expenses. Marathon Oil Corp. of Houston said Tuesday it had scaled back drilling and cut spending by at least 30% from a year earlier. Devon Energy of Oklahoma City said it would cut spending by 30%, and Apache Corp. of Houston said it would cut its budget by more than 37% and cut 90% of its dividend payments to investors. Chevron Corp. of Houston said it would study cutting its capital expenditures.
Shares of (NYSE: MUR) reached a new 52-week low on Monday, and shares were trading down about 10% to $6.76 per share around 11:28 CST. Shares of Exxon Mobil were down more than 8%; Marathon Oil was down 5%; and Chevron Corp. was down more than 11%.