- Exploration and production spending reduced to $2.4 billion
- Continental to cut 2016 spending by 66%, Noble by half
Hess Corp. will cut spending by 40 percent this year, leading almost $5 billion in reductions announced Tuesday amid a prolonged slump in oil prices.
The updated guidance from Hess cuts spending to $2.4 billion from a year ago and compares with an October spending forecast of between $2.9 billion and $3.1 billion this year, according to a statement Tuesday. Since then, oil in New York has fallen by about 29 percent.
“We plan to reduce activity at all of our producing assets,” Chief Operating Officer Greg Hill said in the statement. “We will continue to pursue further cost reductions and efficiency gains across our portfolio.”
Shares rose 1.3 percent to $34.81 in New York Tuesday. They’ve fallen 51 percent in the past year.
Hess kicks off earnings season for independent U.S. oil explorers Wednesday and analysts expect a net loss of $1.6 billion for 2015, for its worst annual performance in at least 28 years as the crude downturn extends into its 20th month. Noble cut its dividend to 10 cents a share from 18 cents, with capital spending expected to be down 50 percent to about $1.5 billion from a year ago. Meanwhile, Continental reduced its capital budget 66 percent, to $920 million, from 2015.
Even after the cuts announced Tuesday, Hess may be spending beyond its means, according to Fadel Gheit, an analyst at Oppenheimer & Co. who rates the shares at market perform.
"They are doing their best, but unfortunately, with crude prices so low, sometimes even your best is not good enough," Gheit said.
Hess intends to spend $820 million to develop fields in regions including Malaysia, the Gulf of Mexico and Guyana, $610 million for production and $470 million to drill in the Bakken Shale of North Dakota and the Utica Shale in the eastern U.S. It budgeted $500 million for exploration, according to the statement.
Hess also affirmed a production forecast between 330,000 barrels of oil equivalent a day and 350,000 barrels for 2016. Analysts expected 341,418 barrels, according to estimates compiled by Bloomberg.