COVID-19 forces more offshore companies to slash exploration and production budgets

Mar 24, 2020 News

Several oil majors operating offshore Guyana are gearing up to shave billions of dollars off their exploration and production (E&P) budgets. This course of action is in response to the coronavirus outbreak which continues to keep demand on the world market at low levels.

Several oil majors are operating offshore Guyana

French multinational, Total S.A, has already made it clear that in the context of oil prices being at US$30 a barrel, it would have to make major cuts to its budget. Specifically, the company’s Chairman and Chief Executive Officer (CEO), Patrick Pouyanné said that the company will cut its 2020 budget by more than US$3 billion or 20%, thereby reducing 2020 net investments to less than US$15 billion.
Kaieteur News understands that the company anticipates US$800 million of savings in 2020 on operating costs instead of the US$300 million previously announced. It also will suspend its US$2billion buyback programme.
In February, the company had announced plans to continue disciplined spending as well as the continuation of its cost reduction programme with an objective of more than US$5 billion in cumulative savings this year.
With respect to Frontera Energy which holds a significant working interest in the Corentyne and Demerara licenses, it is projected to cut its 2020 Capital Expenditure budget by 60 percent to US$130-US$150 million from US$325-US$375 million. It is also expected to streamline an Executive team on cost saving initiatives which would be applicable for the lower priced oil environment.
According to Frontera, expenditure will be primarily focused on development and maintenance activities in the company’s core assets as well as its light and medium oil business unit in Colombia.
The company also revised its average annual production for 2020. It is expected to produce 55,000 to 60,000 barrels of oil equivalent resource per day which works out to a decrease of 8% compared to its 2020 guidance. The company has also shut-in a number of wells that are not economic to operate at current prices, and is also actively working to reduce production and transportation.
As for Tullow, which has a working interest in the Orinduik and Kanuku Blocks, it is expected to cut its investment budget by about a third to US$350 million this year and reduce exploration spending – historically the group’s focus – by almost half to US$75 million. It also said the oil price fall to US$30 a barrel might jeopardize a plan to sell US$1 billion in assets to refill its coffers.
As for the major producer offshore Guyana, ExxonMobil, it has announced that significant cuts are underway. It had previously budgeted $30 billion to $33 billion for projects in 2020.

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