As evidence that current low oil prices are beginning to bite, a handful of independent producers and major oil firms have trimmed their 1998 capital spending plans.
Among those who have reduced their capital budgets are Canada's Ranger Oil Ltd. and Numac Energy Inc., the U.S.'s Amoco Corp., and Venezuelan state oil firm Petroleos de Venezuela SA (Pdvsa).
A few other companies have disclosed 1998 capital budgets that are less than their 1997 outlays. Among these firms are Barrett Resources Corp., Denver, and Triton Energy Corp., Dallas.
Budget revisions
Calgary's Ranger Oil has reduced its capital spending plans by $50 million (U.S.).The company said the revised program of $235 million in outlays will see development activity levels in the North Sea and Angola continue without change, as will exploratory drilling in the North Sea and Canada's Northwest Territories.
Ranger said it is cutting spending plans in other parts of Canada and the Gulf of Mexico and is minimizing outlays on heavy oil developments.
The company hopes this year's expected lower revenues will be followed by increased income next year, as new fields come on stream in the North Sea and off Angola.
As another indicator of prices going south, the company's board has decided to forego declaring an annual dividend for 1997.
Also reining its heavy oil projects is Calgary's Numac Energy. The firm is cutting 3,000 b/d of heavy oil output from its 1998 production. As a result, Numac's total production will average 21,000 b/d and 160 MMcfd of gas this year.
The firm also is reviewing options for its Manatokan heavy oil property, according to Calgary's Financial Post newspaper. Manatokan is now producing 2,200-2,500 b/d vs. 3,200 b/d at the beginning of the year. The crude was selling for only $6 (Canadian)/bbl in January compared with operating costs of about $9/bbl.
Numac has jettisoned plans to spend $40 million (Canadian) at Manatokan, which is near Cold Lake in eastern Alberta. It also has shut in some higher-cost marginal wells. In total, Numac has cut its 1998 capital budget by $16 million to $124 million.
In the U.S., Amoco's Charles Boykin disclosed at an oil and service company forum in Houston last week that his company is reducing its 1998 capital budget. Boykin did not quantify the planned cutback.
Elsewhere, Pdvsa plans to again cut its capital spending projected for 1998, by a further amount of $195 million. The Venezuelan state company in December had trimmed its budget for the current year by almost $800 million from an original budget figure of $7.4 billion. In both instances, Pdvsa cited a lower-than-expected average price for its oil, with the latter reduction based on its oil price slipping 10% from the previous recalculation. At first, Pdvsa reckoned on an average oil price of about $15.50/bbl, down about $1 from the average price it received in 1997. At last report, the current price is more than $3 below even that level.
Like the two Canadian companies, Pdvsa's production is weighted toward heavy oil, which is especially sensitive to price falls.
Year-to-year reductions
Barrett Resources is slashing its 1998 capital budget compared with 1997. The company plans to spend $190 million this year vs. $334 million in 1997.Most of the 1998 budget will go toward three core regions: the Rocky Mountains, $81 million; the Gulf of Mexico, $43 million; and the U.S. Midcontinent, $27 million. Barrett's budget also includes $24 million for exploration in Peru and $15 million for strategic acquisitions.
Barrett reported that reductions are "reflective of lower product prices-particularly oil, where the company is deferring some of its development opportunities."
The reduced spending also reflects a decrease in the company's lease acquisition budget.
Dallas-based Triton Energy is reducing its capital budget $18 million from $194 million in 1997.
"The majority of planned spending this year has been allocated to the completion of oil processing facilities in Colombia so that a production target rate of 500,000 b/d can be reached in 1998," said Triton.
Of Triton's $176 million budget, $103 million will be spent on development of Colombia's Cusiana and Cupiagua fields, and about $23 million on Block A-18 in the Gulf of Thailand. The remaining $50 million will be spent on exploration in Tunisia, China, Colombia, Italy, Ecuador, and other countries.
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