Offshore staff
ADELAIDE/PARIS/HOUSTON – Three more oil companies are taking steps to trim their planned capex investments for 2020.
Santos is reducing its budgeted capital expenditure this year by $550 million. In addition, the company is targeting a $50-million reduction in 2020 cash production costs, and a free cashflow breakeven oil price of $25/bbl.
Some of the savings will come from re-phasing in expenditure for the Barossa gas development offshore northern Australia.
The company still expects to complete its acquisition of ConocoPhillips’ Australia interests during the first half of 2020, subject to third-party consents and regulatory approvals, giving it operatorship of the producing Bayu-Undan field in the Timor Sea and the Darwin LNG complex.
Recently Santos announced a conditional agreement to sell 25% of its stakes in Bayu-Undan and Darwin LNG to South Korea’s SK E&S for $390 million and it remains in advanced discussions other parties interested in taking equity in Barossa.
Taking into account the ConocoPhillips acquisition and the deferral of major growth projects, Santos’ debt covenants have sufficient headroom and are not under threat at current oil prices for a number of years, the company said.
Total will implement capex cuts of more than $3 billion (a reduction of more than 20%), limiting 2020 net investments to less than $15 billion. The savings will be mainly in the form of short-cycle flexible capex.
In addition, the company plans $800 million of operating savings this year vs the $300 million it had previously planned.
Talos Energy said it would seek further cuts this year in addition to the $170 million it identified last week.
Despite the current commodity environment, the company expects to continue generating positive free cashflow in 2020, assuming an oil price in the mid-$20s/bbl over the remainder of the year.
The company said it remained committed to various infrastructure-led, short-cycle projects focused on lowering the lifting cost structure of its assets by adding incremental barrels through existing fixed-cost offshore production facilities.
It believes these high margin, low breakeven investments are economic even in current prices.
Also included in the guidance is a limited, but unchanged, portion of Talos’ budget for FEED work related to its Zama oil development offshore Mexico.
President and CEO Timothy S. Duncan said: “We expect to continue to invest in our infrastructure-led short-cycled developments while staying focused on moving Zama forward towards a final investment decision.”
03/23/2020
