ConocoPhillips slashes 2015 capex

ConocoPhillips has announced a 2015 capital budget of $13.5 billion, a decrease of approximately 20 percent compared to 2014.

The reduction in capital relative to 2014 primarily reflects lower spending on major projects, several of which are nearing completion, as well as the deferral of spending on North American unconventional plays, the company stated in the press release.

Despite the lower investment level, the company expects to achieve approximately 3 percent production growth in 2015 from continuing operations, excluding Libya. Key sources of growth include recent major project start-ups in Canada, Europe and Malaysia, development drilling programs in the Eagle Ford and Bakken, and new production from 2015 major project start-ups at Eldfisk II, the Australia Pacific LNG (APLNG) Project and Surmont Phase 2.

“We are setting our 2015 capital budget at a level that we believe is prudent given the current environment,” said Ryan Lance, chairman and chief executive officer.

“This plan demonstrates our focus on cash flow neutrality and a competitive dividend, while maintaining our financial strength. We are fortunate to have significant flexibility in our capital program. Spending on several major projects has peaked and we will get the benefit of production uplift from those projects over the next few years. In addition, we have significant identified inventory in the unconventionals, where we also retain a high degree of capital flexibility.”

The 2015 capital budget includes funding for base maintenance and corporate expenditures, development drilling programs, major projects, and exploration and appraisal spending. The breakdown is as follows:

Base Maintenance

Approximately $1.9 billion is allocated to base maintenance and corporate expenditures. This is a slight reduction compared to 2014, reflecting lower planned spending in several producing assets across the portfolio.

Development Drilling Programs

Approximately $5.0 billion is allocated toward the company’s development drilling programs. This compares to the 2014 budget of $6.5 billion. In 2015, the Lower 48 development program capital will continue to target the Eagle Ford and Bakken, and will defer significant investment in the emerging North American unconventional plays, including the Permian, Niobrara, Montney and Duvernay. The company retains the flexibility to ramp up or down activity in the unconventionals.

Major Projects

Approximately $4.8 billion is focused on the company’s sanctioned major projects. This represents a significant reduction compared to 2014, which included peak spending at the APLNG and Surmont Phase 2 projects. Funding in 2015 will focus on completion of APLNG and Surmont Phase 2, as well as multiple projects in Alaska, Europe and Malaysia.

Exploration and Appraisal

Approximately $1.8 billion is allocated toward the company’s exploration and appraisal programs, down slightly compared to 2014. This spending will focus on conventional activity in the U.S. Gulf of Mexico, offshore West Africa and Nova Scotia, as well as unconventional activity in North America.

ConocoPhillips will provide additional details on its 2015 capital program and production outlook during its fourth-quarter conference call on Jan. 29, 2015 and its Analyst Meeting on April 8, 2015 in New York.