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Fallout continues from declining oil prices: Crude now US$44 per barrel

Published:Friday | January 30, 2015 | 12:00 AM

Investors are dumping stocks in Colombia's largest private oil company as the government prepares for mass layoffs sparked by the plunge in crude prices.

Shares of the Toronto-listed Pacific Rubiales have fallen by more than half this month and 90 per cent since its 2011 high as declining oil prices force the company to slash investments and sell assets.

The company, a major tax revenue generator, is also ending its sponsorship of Colombia's national soccer team.

Prices tumbled another 10 per cent Thursday as investors reacted to a Credit Suisse report forecasting shares will fall below CA$1 (80 US cents).

Colombia's Labor Ministry said Thursday it expects the oil industry to shed up to 25,000 jobs.

Oil sales account for more than half of Colombia's exports and 15 per cent of government revenue.

At mid-afternoon Thursday, benchmark US crude was trading at US$44.34 a barrel in New York. The contract lost US$1.78 on Wednesday to close at US$44.45, after the Energy Department reported that US oil inventories rose to their highest levels ever recorded.

Economic collapse

Last summer, the price of oil was hovering at around US$100 a barrel. The plunge in oil has crushed the Russian ruble, erased US$80 billion from Exxon Mobil's market value and pushed Venezuela to the brink of economic collapse.

ConocoPhillips posted a loss for the fourth quarter, hurt by falling oil prices. The company said it will cut spending on drilling and exploration projects in parts of the US. Its shares fell six cents to US$62.52.

Royal Dutch Shell Plc plans to resume drilling in Alaska this year even as it plans to cut spending by US$15 billion over the next three years because of the drop in oil prices.

Chief Executive Officer Ben van Beurden said the Western Chukchi Sea has the potential to produce billions of barrels of oil.

"We're planning on drilling in Alaska in 2015, subject to getting the permits and legal clearance," van Beurden said on a conference call with reporters.

US$1-billion investment

The company, which suspended operations in Alaska in 2013 after one of its oil rigs ran aground, plans to spend about US$1 billion in Alaska this year, even as it holds global capital investment at 2014 levels.

"We always said we were going to just pause the programme. And we paused it last year and the year before," van Beurden told the BBC. "But at the same time, we didn't abandon all the infrastructure, logistics that we had in place because you cannot, for such a complex and large operation, just scale down and scale up whenever you want. So we have been preparing all this while for an eventual return to this year."

Europe's largest oil company by market value said fourth-quarter net income fell 57 per cent to US$773 million due to the steep decline in oil prices. The price of Brent crude, an international variety of oil, dropped about 50 per cent last year.

Not counting the impact of changes in the oil price on inventory, the company said its quarterly earnings rose 93 per cent to US$4.2 billion.

- AP