West Texas oil producers reduce capital budgets, rig count
A swift plunge in the price of crude is sending shockwaves across West Texas oil country.
Some producers in the oil-rich Permian Basin are slashing spending plans for 2015 as crude prices have fallen by nearly half in just six months, according to the Midland Reporter-Telegram.
Concho Resources trimmed its US$3 billion capital program by a third and will reduce the number of drilling rigs it operates, from 35 to 25 in the second quarter, the newspaper reported Sunday.
Although the board of Elevation Resources approved a US$227 million capital budget in December, Elevation chief executive Steve Pruett said he will ask the board to cut the budget to US$100 million.
"We are going to invest as little as we can in this environment," Pruett said.
Diamondback Energy, another Midland-based operator, is also revising its plans for 2015. The capital budget has been scaled back by more than 40 per cent, to US$450 million, according to Travis Stice, Diamondback's chief executive.
Some large operators, including Diamondback, hedged production, meaning they will keep receiving high-dollar amounts per barrel, even as crude prices fall.
Some smaller operators, however, will have to make more drastic reductions.
Henry Resources President Danny Campbell said the company will cut activity by up to 40 per cent.
"We're not cutting back in one area, we're cutting across the board," he said, adding that no one had expected prices to fall so low and so quickly.