Kosmos, Hess, ExxonMobil respond to market developments

March 17, 2020
Three more oil companies have responded to the current market price volatility.

Offshore staff

DALLAS/IRVING, Texas – Three more oil companies have responded to the current market price volatility.

Kosmos Energy had budgeted $325-$375 million for its base production business, but will now seek to lower that figure by around 30% to under $250 million while keeping 2020 production stable, and with a minimal anticipated impact on output in 2021.

The company said it had identified more than $100 million of discretionary expenditure related mainly to exploration in the Gulf of Mexico basin-opening opportunities. Kosmos stressed that it had significant flexibility in its 2021 capital program should current market conditions continue.

Offshore Mauritania and Senegal, the company is working with operator BP to defer 2020 Tortue Phase 1 capex with a view to extending the carry of its capital obligations through the end of this year.

In addition, it will continue to try to sell down its interests. Tortue Phases 2 and 3 at present face final investment decisions in mid-2022 and mid-2023.

Kosmos is targeting opex and general/administrative savings of more than $60 million this year. In terms of opex, the company will pursue a reduction of $1/boe without impacting asset integrity or near-term production.

Further savings should come partly through a reduction in staff.

Hess will implement an $800-million reduction in its capital and exploratory budget for 2020, down to $2.2 billion.

At the same time, the company has secured a new $1-billion three-year term loan agreement which should strengthen the company’s cash position and financial liquidity.

CEO John Hess said: “With 80% of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three-year loan agreement, our company is well positioned for this low-price environment.

“Our focus is on preserving cash and protecting our world class investment opportunity in Guyana.”

The company plans to defer most of its discretionary exploration and offshore drilling activities, excluding Guyana.

ExxonMobil said it was looking to significantly reduce its own spending.

“Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term,” said Chairman and CEO Darren Woods. “We will outline plans when they are finalized.”

He pointed out that the company had come through various market downturns throughout its history and had experience operating in a sustained low-price environment.

“We remain focused on being a safe, low-cost operator and creating long-term value for shareholders,” he added.

The company is monitoring the spread of COVID-19 and has adjusted working arrangements accordingly for staff and support communities where it operates.

“We are confident that we will manage through these challenging times by taking deliberate action to keep our people safe, our environment protected, and our company strong,” Woods said.