Occidental Petroleum Reduces Rig Count In Permian Basin
Occidental’s costs are reduced by drilling activity, but it will be able to cover part of the debt from the purchase of CrownRock.
Capital spending on shale production and exploration will be cut by $320 million and two drilling rigs in the U.S. Permian Basin will be idled this year, Houston-based Occidental said.
The company’s spending will increase in the Gulf of Mexico, chemicals and enhanced oil recovery areas.
The drop in spending at Permian was driven by efficiency and activity containment, Occidental said in its presentation.
The move is a departure from years of increased drilling activity in America’s largest shale basin, where Occidental is one of the leading producers. The additional cash flow generated by the decline in drilling activity will help pay down debt associated with the recent $10.8 billion acquisition of privately-owned regional producer CrownRock, Bloomberg writes.
Occidental plans to produce the equivalent of 1.25 million barrels per day this year, up just 1.3% from its fourth-quarter output. Capital expenditures will be about $6.5 billion, less than the $7 billion analysts estimate.
The company’s fourth-quarter adjusted earnings were 74 cents per share, beating analysts’ average estimate of 67 cents.
