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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Apache Corporation    APA


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Prolonged oil slump sparks second wave of cuts to 2016 budgets

02/07/2016 | 02:32pm EST
A pump jack is seen at sunrise near Bakersfield

(Reuters) - Less than two months into the year, the top U.S. shale oil companies have already cut their budget for 2016 a second time as the relentless drop in oil prices continues to erode their cash flow.

With oil prices firmly wedged in the low $30-per-barrel range, oil producers are deferring spending on new wells and projects.

"Companies' language has shifted towards preserving balance sheets and cash, and keeping expenditure within cash-flows, which means that budgets are going to fall further," said Topeka Capital Markets analyst Gabriele Sorbara.

Eighteen of the top 30 U.S. oil companies by output have so far outlined their spending plans for 2016. They have reduced their budget by 40 percent on average, steeper than most analysts' expectations, according to a Reuters analysis.

These 30 companies had, on average, lowered their spending plans for 2016 by more than 70 percent last year.

Some such as Hess Corp and ConocoPhillips, who had already planned to spend less this year than in 2015, have now further cut their capital expenditure targets. Others are expected to follow suit.

But, is there room for further cuts?

While reduced prices for oilfield services and increased efficiencies have helped companies scale back spending, many industry experts say there may not be room for further cuts.

"It's almost like a 80/20 rule – 80 pct of the cost reduction has already occurred, another 20 percent remains," said Rob Thummel, a portfolio manager at Tortoise Capital Advisors LLC.

Although, the reduced spending has not yet impacted shale output, production is expected to start falling by the end of the year.

"The capital cuts that the industry is making should result in ... a supply shock to the downside," ConocoPhillips' chief executive, Ryan Lance, said on Thursday.

U.S. crude oil production is expected to decline to 8.5 million barrels per day (mmb/d) in November 2016, from 9.2 mmb/d in December 2015, according to the U.S. Energy Information Administration.

Even if the supply cuts lead to a recovery in oil prices, spending on exploration and production is not expected to bounce back immediately.

"If you're burning cash during low oil prices – and the longer that happens, the more pressure on the balance sheet – that means in a recovery scenario, it's likely going to take longer for producers to commit to larger capex budgets," said Fraser McKay, an analyst at energy consultancy Wood Mackenzie.

(Reporting by Swetha Gopinath and Amrutha Gayathri in Bengaluru, additional reporting by Anet Josline Pinto; Editing by Savio D'Souza)

By Swetha Gopinath and Amrutha Gayathri

© Reuters 2016
Stocks mentioned in the article
ChangeLast1st jan.
APACHE CORPORATION -2.73% 15.3 Delayed Quote.7.82%
CHESAPEAKE ENERGY CORPORATION -21.32% 4.17 Delayed Quote.174.34%
CHEVRON CORPORATION -1.69% 89.36 Delayed Quote.5.81%
CIMAREX ENERGY CO. -3.95% 43.49 Delayed Quote.15.94%
CONCHO RESOURCES INC. -6.02% 65.6 End-of-day quote.12.43%
CONOCOPHILLIPS -2.11% 41.68 Delayed Quote.4.23%
CONTINENTAL RESOURCES, INC. -0.42% 18.88 Delayed Quote.15.83%
DENBURY INC. -4.46% 0.03 End-of-day quote.0.00%
EOG RESOURCES, INC. -3.10% 53.49 Delayed Quote.7.26%
EXXON MOBIL CORPORATION -2.20% 45.87 Delayed Quote.11.28%
HESS CORPORATION -1.48% 57.19 Delayed Quote.8.33%
MURPHY OIL CORPORATION 1.27% 12.71 Delayed Quote.5.04%
NOBLE ENERGY, INC. 1.44% 8.46 End-of-day quote.0.00%
OASIS PETROLEUM INC. -2.94% 37.37 Delayed Quote.0.84%
OCCIDENTAL PETROLEUM CORPORATION -5.25% 20.38 Delayed Quote.24.26%
OVINTIV INC. -4.70% 20.9 Delayed Quote.19.90%
PIONEER NATURAL RESOURCES COMPANY -4.40% 123.64 Delayed Quote.8.56%
QEP RESOURCES, INC. -2.64% 2.95 Delayed Quote.23.43%
THE LEAD CO., INC. 0.49% 824 End-of-day quote.-1.90%
WPX ENERGY, INC. 5.36% 9.43 End-of-day quote.15.71%
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Financials (USD)
Sales 2020 4 055 M - -
Net income 2020 -4 920 M - -
Net Debt 2020 8 573 M - -
P/E ratio 2020 -1,18x
Yield 2020 1,24%
Capitalization 5 775 M 5 775 M -
EV / Sales 2020 3,54x
EV / Sales 2021 2,91x
Nbr of Employees 3 163
Free-Float 90,0%
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Technical analysis trends APACHE CORPORATION
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Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 30
Average target price 19,28 $
Last Close Price 15,30 $
Spread / Highest target 89,5%
Spread / Average Target 26,0%
Spread / Lowest Target -28,1%
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John J. Christmann President, Chief Executive Officer & Director
John E. Lowe Independent Non-Executive Chairman
David Clay Bretches Principal Operating Officer & EVP-Operations
Stephen J. Riney Chief Financial Officer & Executive Vice President
Travis R. Osborne Vice President-Information Technology
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