Oil and gas companies' 2003 spending plans flat or lower than 2002

By Paula Dittrick
OGJ senior staff writer

HOUSTON, Nov. 22 -- Oil and gas exploration and production companies are planning 2003 capital expenditure budgets that are flat or lower than their 2002 budgets amid concerns about volatile commodity prices, Wall Street's expectations, and the economy in general.

"We are in a very strange period right now. Commodity prices are high, very good. . .. Companies should be booming, and mergers and acquisitions should be at a high. Well, equities aren't booming, so companies are cautious," Rick Roberge, leader of the PricewaterhouseCoopers's oil and gas transaction services group in Houston told OGJ Oct. 25.

"A lot of companies don't even have plans in 2003 to spend their cash flow. They are going to spend less than their cash flow, meaning they are going to pay down some debt to make the balance sheet look better," Roberge said.

Executives from ConocoPhillips and Unocal Corp. confirmed Roberge's industry outlook this week.

ConocoPhillips cuts spending
Speaking to a group of analysts in New York on Friday, ConocoPhillips CEO Jim Mulva said the company plans to reduce capital spending 25% compared with the stand-alone capital programs of the previous two companies.

Conoco Inc., Houston, and Phillips Petroleum Co., Bartlesville, Okla., completed their $15 billion merger into the third largest US-based integrated oil firm on Aug. 30 (OGJ, Sept. 9, 2002, p. 42).

ConocoPhillips plans to improve its return on capital employed to 12-14% during the next several years, he said. The strategy also calls for ConocoPhillips to cut its debt-to-capital ratio to 34% by 2004 compared with a current ration of 39%.

The goal is to reduce debt while growing equity. Mulva said the company's strategy also involves rationalizing up to $4 billion of lower returning assets and increasing the post-merger cost savings/year target to $1.25 billion from $750 million.

"We will use a disciplined approach to improve returns for our shareholders," Mulva said. "In addition to the increased post-merger cost savings and asset rationalization, 75% of our 2003 capital budget will be dedicated to growing our upstream business, which has historically provided higher returns."

ConocoPhillips plans to grow the ratio of its upstream business to its total asset base to 65% from 57%. Its emphasis will be on "very large oil and gas developments that can generate significant revenues over long period at competitive operating costs," a news release said.

Regarding downstream operations, ConocoPhillips said it will focus on improved returns by providing reliable operations with a low-cost structure, rationalizing assets, executing clean fuels projects, and capitalizing on proprietary technologies.

Unocal holds spending steady
Unocal expects to keep its overall capital spending in 2003 about even with the 2002 level of $1.7 billion, its top executive told analysts Wednesday.

"We see a ramp-up of spending on large, high-impact development projects while reducing spending on the smaller scale development and exploitation projects," Charles R. Williamson, Unocal chairman and CEO said.

Unocal plans to maintain or reduce exploration capital spending, he added. Capital spending for large development projects, including deepwater in Indonesia and the Gulf of Mexico, along with the Caspian region development and pipeline is expected to reach $700 million next year, up from $430 million.

Unocal will reduce other 2003 E&P development capital to $600 million compared with $815 million in 2002.

Unocal has forecast exploration capital spending in 2003 at $300 million, down from an expected $370 million this year.

Contact Paula Dittrick at paulad@ogjonline.com

Related Articles

ConocoPhillips slashes 2015 capital budget

12/08/2014 ConocoPhillips has elected to reduce its 2015 capital budget to $13.5 billion, down 20% compared with this year’s budget. The news comes on the hee...

BLM issues final SEIS for Greater Mooses Tooth project in NPR-A

10/30/2014 The US Bureau of Land Management released its final supplemental environmental impact statement for the proposed Greater Mooses Tooth (GMT1) oil an...

Western gulf lease sale attracts $110 million in high bids

08/20/2014 Gulf of Mexico western planning area Lease Sale 238 drew 93 bids from 14 companies over 81 blocks covering 433,823 acres, totaling $109,951,644 in ...

ConocoPhillips, Enap sign deal to study unconventional oil, gas in Chile

08/06/2014 ConocoPhillips and Chile’s state oil company Empresa Nacional del Petroleo (Enap) have signed a technical agreement to jointly conduct geological, ...

Oando completes purchase of Nigeria assets from ConocoPhillips

07/30/2014 Oando Energy Resources (OER), a Calgary-based subsidiary of Oando PLC, has completed its acquisition of the Nigeria upstream business of ConocoPhil...

ConocoPhillips, Suncor join Shell in deepwater exploration off Nova Scotia

06/11/2014

ConocoPhillips and Suncor Energy Inc. are joining Shell Canada as partners in exploring the deepwater Shelburne basin off Nova Scotia.

ConocoPhillips raises estimates on Eagle Ford recoverable resources, production

04/11/2014 ConocoPhillips has increased its estimated resource base in the Eagle Ford play to 2.5 billion bbl of oil in place from 1.8 billion bbl, as well as...

ConocoPhillips reports higher 2013 earnings

02/10/2014 ConocoPhillips reported full-year earnings of $9.2 billion in 2013, an increase from the $8.4 billion totaled in 2012, which included $1.2 billion ...

ConocoPhillips reports higher 2013 earnings, expects higher production in 2014

01/31/2014 ConocoPhillips reported full-year earnings of $9.2 billion in 2013, an increase from the $8.4 billion totaled in 2012, which included $1.2 billion ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected