EOG Resources said May 7 it was shutting existing wells and delaying the start up of about 150 net new ones until the second half of 2020, as it further cuts its spending to battle one of the worst oil price shocks in decades.
Oil and gas producers have had to take several measures to shore up cash that included slashing expenses, dividend suspension or reduction, layoffs and scaling back on activity after a historic slump in crude prices due to a supply glut and the COVID-19 induced fall in fuel demand.
EOG said the cut in net production volume related to the shut-in will be an average of 40,000 bbl/d of oil for the full-year 2020. The month of May is estimated to see a cut of 125,000 bbl/d of oil.
The Houston-based company also further reduced its 2020 capex to between $3.3 billion and $3.7 billion, a reduction of $1 billion from the previous updated plan and a 46% fall from the original plan.
North American oil and gas producers have cut their 2020 spending by nearly 34%, or about $41.6 billion, from their original estimates, according to data compiled by Reuters.
EOG said it has cut its operated rig count from 36 rigs to eight rigs during the last six weeks, with an average of about six rigs expected for the remainder of 2020.
The action to reduce activity to six rigs should solidify management's strategy of focusing on returns first, balancing activity for free cash flow, and supporting the dividend as a priority rather than growth, RBC Capital Markets analyst Scott Hanold said in a note.
EOG said it currently plans to bring about 485 net wells on to production for 2020 compared with the original forecast of 800 wells, focusing on the Delaware Basin in the Permian and South Texas Eagle Ford Shale.
"In order to generate higher rates of return, the company has elected to defer some of its production until oil prices recover," the company said in a statement.
EOG now targets full-year 2020 oil production of about 390,000 bbl/d at the midpoint, a 15% fall from 2019 levels. Analysts had expected 2020 oil production of 456,086 bbl/d, according to IBES data from Refinitiv.
EOG reported first-quarter adjusted profit of 55 cents per share, missing analysts' average estimates of 66 cents per share.
Shares of the company were down 4% in extending trading.
A recent survey revealed the energy transition will likely be immune to COVID-19 as 92% of oil and gas executives reported already having or developing a strategy to reduce reliance on fossil fuels.
As chairman and president of BP America, David C. Lawler is expected to lead the British oil major’s efforts in the U.S. to become net-zero by 2050.
Acteon Group Ltd., a leading global provider of marine and seabed services to the renewable, infrastructure and oil and gas industries, said May 27 that Dr. Carl Trowell is to be appointed as group CEO, succeeding Richard Higham.