IHS: North American E&P companies cut spending 36% in 2020

North American E&P companies plan to reduce spending in 2020 by 36% relative to 2019 levels, translating to a $24.4-billion cut in 2020 compared to last year, according to IHS Herold calculations. Low oil prices and the collapse in world oil demand are driving the spending cuts among oil companies around the world. The largest cuts in percentage terms so far are coming from North American E&P companies, but international oil companies are also cutting spending significantly, by 20-30%, with a substantial part for some coming from their operations in the US.

The cuts in spending will figure in discussions at the Apr. 9 OPEC+ meeting and the potential new grouping of “OPEC+ plus G20.” Unlike other countries, the US government cannot mandate cutbacks. But market economics and logistical constraints are mandating the cutbacks reflected in the “Big Cut” in company spending.  According to IHS estimates, US crude oil production will fall 2.9 million b/d by the end of 2020 compared to first-quarter 2020. Canada, whose main producing province of Alberta already has constrained production via its curtailment policy, will also be impacted. Total investment in the Canadian oil sands will be the lowest in 15 years.   

Of the 44 North American E&Ps that have made public spending announcements, 41 are cutting relative to 2019 levels. This year would mark the second consecutive year of lower spending.