Chevron, Conoco, Freeport Slash 2016 Capital Budgets

On Wednesday, Freeport-McMoRan Inc. (NYSE: FCX) said it now plans to spend $1.6 billion on oil and gas capital investments for 2016, down from a previous estimate of $2.0 billion. For 2017, the mining company and oil and gas producer has now set capital expenditures (capex) for oil and gas spending at $1.2 billion, also down from a prior estimate of $2.0 billion.

But while capex declines in Freeport’s oil and gas division, production is expected to rise and production costs are expected to fall. The company expects production costs to drop from $19 per barrel of oil equivalent to less than $16 in both 2016 and 2017. The company said that if Brent is priced at $45 a barrel Freeport “would substantially fund its capital expenditures” from its oil and gas cash flows.

After markets closed on Wednesday, Chevron Corp. (NYSE: CVX) announced that its capital budget for 2016 will decline by 24% compared with the company’s expected 2015 capital spending. The company’s planned $26.6 billion in 2016 capex includes $4.5 billion in spending by affiliated companies. The majority ($18.6 billion) of Chevron’s capital spending is targeted for international upstream projects. U.S. upstream projects are expected to get $5.4 billion in capital support, and the company’s global downstream spending is targeted for $2.2 billion, of which $1.6 billion is expected to be spent on U.S. operations.

On Thursday, ConocoPhillips (NYSE: COP) said that its capital spending budget for 2016 will total $7.7 billion, a 55% cut compared with expected 2015 capital spending of $10.2 billion. The company said the reductions will come primarily from lower major project spending, deflation capture and efficiency improvements. Capex for 2016 capital is allocated with approximately $1.2 billion (16%) to base maintenance and corporate expenditures, $3 billion (39%) to development drilling programs, $2.1 billion (27%) to major projects and $1.4 billion (18%) to exploration and appraisal.

Even though Conoco’s planned capital spending is expected to be much lower next year, production is expected to rise by 1% to 3%, excluding the impact of divestments.
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Freeport-McMoRan stock traded 3.5% higher shortly before noon on Thursday, at $7.23 in a 52-week range of $6.63 to $23.97.

Chevron shares traded up 2.5%, at $89.80 in a 52-week range of $69.58 to $114.45.

Conoco’s share traded higher by 2.5% as well, at $49.66 in a 52-week range of $41.10 to $71.37.