$22 Billion Cut from 2015 E&P Budgets
There has been a lot of activity within E&P operators’ budgets for 2015 in the face of low oil prices in the market. So far, about $22 billion has been cut from initial 2015 budgets, with more updates on the way.
Continental Reduces Bakken Spend by $1 Billion
Continental Resources (NYSE: CLR) has been chipping away at their budget. Their initial $4.6 billion budget for 2015 has been revised -41.3% to $2.7 billion. This revision shows a reversal in their strategy as they had originally announced a 1.1% increase from their 2014 budget. The most significant change has been in the Bakken, with a change of $1 billion and a planned operation of 11 rigs compared to the 19 that was first budgeted for 2015.
Abraxas Petroleum Corporation (NASDAQ: AXAS) has had two revisions to their 2015 budget, the first being a 5.3% increase over their $200 million budget in 2014. Their next revision showed a much different story with a -73.1% decrease to $53.8M, assigning no capital budget to their Raven Drilling subsidiary which operates in the Williston Basin.
Antero Resources (NYSE: AR) has also been bracing for low oil prices by cutting their 2015 budget by -41% to $1.8 billion. Of that, $50 million is allocated to fresh water distribution, which is 75% lower than what they spent in 2014. About 60% of the $1.8 billion is allocated to the Marcellus. They are dropping their rig counts in the Marcellus and Utica plays by 7 rigs and expect to operate around 14 for 2015.
Key Eagle Ford E&Ps Cut Back
Eagle Ford player Sanchez Energy (NYSE: SN) has been active in multiple revisions to their 2015 budget, the first coming in -23.9% lower than the $1.15 billion originally planned at $875 million. They then further reduced the budget another -28.6% to $625 million. About $400 million of the new budget is assigned to Catarina for drilling and completion costs, with a reduction to 3.5 rigs operating, a -60% change in comparison to fourth quarter levels.
Rosetta Resources (NASDAQ: ROSE) revised their initial 2015 budget by -21.1% to about $750 million, despite their initial 2015 budget being -20.8% lower than their 2014 budget. Of that $750 million, 54% will be spent in Eagle Ford, and they plan to operate one less rig in 2015.
Murphy Oil (NYSE: MUR) decreased their 2015 budget -41% to $2.3 billion, a stark change from their 2014 budget of $3.9 billion. As for their North American onshore budget, they have allotted $1.03 billion, a reduction of -46% in the Eagle Ford. Of the $2.3 billion, 45% will be used in the Eagle Ford. The graph reflects Murphy’s EBITDA and leverage with estimates for 2015, 2016, and 2017.
Murphy stated in an investor presentation that cost reductions will be a focus and rig reductions may hurt efficiencies in 2015. Murphy will reduce the number of rigs from 8 to 4 in Eagle Ford by March 2015. The company expects to bring ~118 wells online this year compared to ~219 wells in 2014. Eagle Ford production is expected to remain flat.
ConocoPhillips’s (NYSE: COP) initial 2015 budget declined -19.2% to $13.5 billion, compared to their 2014 budget of $16.7 billion. A further revision cut this past month reduced their budget by -14.8% to $11.5 billion. Cutbacks in the budget are mostly coming from U.S. onshore drilling and exploration activities.
Permian Players Slow Rig Plans
Exclusive Permian player Callon Petroleum (NYSE: CPE), announced an initial 2015 budget in the range of $150-$165 million, which is about -26.7% lower then their 2014 budget of $215 million. After March 2015, they are planning to operate 2 horizontal rigs after their 1 vertical rig (currently operational) is released.
Another independent Permian player, Parsley Energy (NYSE: PE), cut their budget to $225-$250 million. They plan to spend $195-$210 million on drilling and completion activities. Parsley currently operates 4 horizontal rigs and plans to drop that number to 2 for the first half of 2015 and run 4 in the second half of 2015.
Encana & Cabot Increase Budgets
Encana Corporation (NYSE: ECA) and Cabot Oil & Gas (NYSE: COG) are two of the very few that have larger initial 2015 budgets then their 2014 budgets. Encana has increased their budget by 9.8% to about $2.8 billion, assigning the Permian about $900 million and the DJ Basin about $250 million.
Encana is involved in exploration, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States, with their primary U.S. Plays being DJ-Niobrara, Permian, and Eagle Ford. The company was founded in 1971 and is headquartered in Canada. The chart shows Encana financial metrics and estimated leverage for 2015 and 2016.
Encana also created a stronger Permian presence with its recent acquisition in 2014 of Athlon Holdings.
Cabot Oil & Gas increased their initial 2015 budget by 24.3% to about $1.6 billion. They have allocated 52% to the Marcellus and 46% to the Eagle Ford. They are decreasing rig activity in Marcellus by one rig and staying flat at 4 rigs in Eagle Ford. Cabot continues to be one of the top independent E&P performers.
Other Notable Changes
- Approach Resources (NASDAQ: AREX) dropped their budget -55% to $180 million compared to their 2014 budget and plan to reduce their drilling activity in the Permian Basin.
- Carrizo Oil and Gas (NASDAQ: CRZO) lowered their budget by -41.8% compared to their 2014 budget.
- Oasis Petroleum (NYSE: OAS) decreased their budget -41.5% to $800 million for 2015, compared to their 2014 budget of $1.4 billion.
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