Anadarko Guts Budget As Oil Falls

Energy explorer, which has said it will try to avoid cutting jobs, posts a $1.25 billion loss for fourth quarter

Anadarko Petroleum Corp. is bracing for another tough year, with plans to halve its 2016 investment budget, as crude prices slip deeper into a crippling range.

"Greater market dislocation appears likely," Anadarko CEO Al Walker said in a written statement. As if to emphasize the point, domestic crude dropped 6 percent on Monday.

The Woodlands-based oil explorer is planning to make deeper capital budget cuts than even the reductions it made last year, as crude prices fall too low to make money in the shale acreage that Anadarko holds.

"Value creation and preservation is our best course of action," Walker said.

That's why Anadarko expects to cut its capital expenditures - the lifeblood of the oil field service sector that employs thousands in Houston - by nearly 50 percent to $2.8 billion. That's a deeper spending cut than last year, when the company reduced its budget 40 percent.

Anadarko posted a $1.25 billion loss in the fourth quarter of 2015, worse than its $395 million loss in the same time the year before. It took $954 million in special charges, including after-tax write-downs of its producing properties and exploration assets. Its revenue dropped 77 percent to $2.1 billion.

Crude prices fell amid more signs that China's economy has weakened and after Iran deflated market hopes that the Organization of the Petroleum Exporting Countries could coordinate a production cut alongside Russia. Speculation had driven up oil prices over the past two weeks, but that boost appeared to end Monday.

"We do not expect such a cut will occur unless global growth weakens sharply," Goldman Sachs analysts wrote Monday. "Such a cut would be self-defeating given the short cycle of shale production and the only nascent non-OPEC supply response."

U.S. oil fell $2 to $31.62 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 50 cents to $34.24 a barrel on the ICE Futures Europe.

Others slash jobs

Anadarko has maintained it will try to avoid cutting jobs because of the oil bust, a unique stance among big oil companies. Chevron Corp., Royal Dutch Shell and BP have said they'll cut a combined 10,800 jobs this year.

In Texas, U.S. oil producers Southwestern Energy and Quicksilver Resources, and a handful of oil field service companies including National Oilwell Varco and Maersk Drilling, told regulators they would soon cut or have cut more than 900 jobs in the state combined, according to the Texas Workforce Commission's report Monday.

National Oilwell Varco, an oil field services giant based in Houston, said it plans to cut 129 workers and close a manufacturing facility in north Houston. Tenaris, which makes steel pipe, will close a plant in northwest Houston and cut 166 jobs.

Maersk Drilling has started notifying the 80 employees that work aboard a semisubmersible rig, the Maersk Developer, of job cuts. As recently as summer 2014, that rig had drilled an exploratory well in the Gulf of Mexico for Statoil.

Anadarko's decision

Anadarko's Walker said the oil explorer's decision last year not to expand its drilling program while energy prices languished paid off because oil and gas markets haven't yet recovered.

"We did not expect oil prices to recover in 2015 and believed it could take well into 2016 before markets would stabilize on a sustained basis, costs would become more aligned with the new operating environment and investments in short-cycle assets (like shale plays) would be more attractive." Walker said.

Last year, the company said, it spent more of its budget on big deep-water projects and exploration - considered long-term projects that take a lot more time to develop than onshore U.S. shale plays, which have bursts of production at first but rapidly deteriorate if investments decline.

In the U.S., Anadarko concentrated on its prized Wattenberg field in Colorado. In that field, it cut its drilling costs per foot in half and brought down well stimulation costs about a third, but output increased 30 percent.

Anadarko posted its fourth-quarter earnings after the market closed on Monday, and executives will host a conference call with investors Tuesday to discuss the results.

Exxon Mobil Corp., BP, Royal Dutch Shell, ConocoPhillips and Occidental Petroleum Corp. are all set to report fourth-quarter earnings this week.

Source: Houston Chronicle