Occidental to cut production by 6%, signalling further pain in oil and gas industry as coronavirus impacts emerge
The largest producer of oil and gas in Weld County said Wednesday it would slow production across the company by 6%, as rapidly declining oil prices and the economic situation around the world due to the COVID-19 virus squeezes the energy industry.
Houston-based Occidental Petroleum Corp. (NYSE: OXY) said based on current prices hovering around $25 per barrel for West Texas Intermediate, the company plans to produce between 1.275 million and 1.3 million barrels per day, compared to the previous estimate of 1.36 million to 1.39 million barrels per day.
Occidental also plans to cut its capital spending plan for the year by $800 million, weeks after it cut about $2 billion from its spending plan. It also plans to slash $600 million in corporate spending, which includes deep cuts to executive pay and workers making more than $76,000 per year.
“We are making solid progress with additional cost reductions to help withstand the low commodity price environment and other macroeconomic pressures impacting our industry and the global economy,” CEO Vicki Hollub said in a prepared statement.
It’s unclear how much that will affect the company’s operations in the Wattenberg Field that covers southwest Weld County or the greater Denver-Julesburg Basin that stretches from southern Wyoming along the Front Range to Crowley County. The company declined to offer additional details Wednesday.
The global oil industry is struggling to adjust to the new normal of sub-$30 per barrel prices after Saudi Arabia and Russia began producing at maximum capacity earlier this month after disagreeing on reducing output to meet the worldwide drop in demand caused by the COVID-19 virus driving economic activity to a near-halt.
That led to several oil producers cutting expenditures, including some of the largest in Weld County.
The worries are greater for Occidental. Last week, credit ratings firm Moody’s Corp. downgraded Occidental’s bonds to junk status due to the large debt it is carrying from its 2019 acquisition of Anadarko Petroleum.
Earlier that week, the Colorado Oil and Gas Conservation Commission fined Occidental a state-record $18.25 million after a natural gas pipeline owned by Anadarko caused a house explosion in Firestone in 2017, which killed two and injured two others. The company said it would not contest the fine.
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