The coming shale patch pain for U.S. oil companies
The consultancy Wood Mackenzie has tallied how much U.S. oil producers are cutting back spending as the industry moves to crisis footing.
The big picture: What's already announced — from both independent producers and global giants like Chevron and BP — is eye-popping.
- And there's more to come as companies deal with prices at their lowest levels in two decades due to coronavirus crushing demand and the Saudi-Russia price war.
Driving the news: "22 U.S. independents have cut investment for 2020 by a total of US$20 billion, an average of 35%, and three by 50% or more," they write.
- Indeed, Devon Energy and Diamondback energy announced even further cuts this week.
Flashback: U.S. producers also cut back sharply when prices nosedived in the mid-2010s.
- Wood Mackenzie notes that this time the spending cuts so far have been similar, but have arrived faster — and more are expected.
- "[C]ompanies today are far leaner than back then; and what we’ve seen so far may just be a taste of what’s to come," they write.
- They note that multiple rounds of spending reductions already announced by some companies are a sign that "further, deeper cuts" are coming for many U.S. independent producers.