ConocoPhillips <COP.N>, the largest U.S. independent oil company, plans to reduce capital spending by 25 percent next year and sell more non-core assets as it looks to shore up its finances amid a prolonged slump in oil prices.
The company’s shares rose as much as 3 percent on Thursday, after it said it would cut capital spending to $7.7 billion in 2016 from an estimated $10.2 billion this year.
ConocoPhillips expects to spend a bulk of next year’s budget on U.S. shale fields in Texas and North Dakota, and on drilling operations in Alaska and Gulf of Mexico.
The company’s budget cut announcement comes a day after larger rival Chevron Corp <CVX.N> said it planned to slash its budget by 24 percent in 2016.
Oil producers are reining in capital budgets and cutting costs as oil prices show little sign of rising in the near future.
ConocoPhillips said on Thursday it expects operating costs to fall by $500 million next year.
“The company is defending the balance sheet and dividend with more aggressive opex reductions than its peers,” Wells Fargo Securities analyst Roger Read wrote in a note.
The next year will be the second year of reduced spending for most U.S. oil producers. A more than 60 percent fall in oil prices since June 2014 forced several rounds of spending cuts this year.
Global exploration and production spending is expected to fall by 11 percent in 2016, adding to a 20 percent decline in 2015, according to analysts at Evercore ISI.
ConocoPhillips, which has already raised $600 million from asset sales this year, said it expects to close a further $1.7 billion of disposals, latest by the first quarter of 2016.
The company is also planning to raise an additional $1 billion to $2 billion from asset sales in 2017.
ConocoPhillips does not expect additional borrowings in 2017, given the asset sales, Chief Finance Officer Jeff Sheets said on a call with analysts.
“Modest borrowing” of about $2 billion can be expected next year, Sheets said. The company had nearly $25 billion in debt as of September end.
Conoco said it expects 2016 production to grow 1-3 percent from an estimated 1,515-1,525 thousand barrels of oil equivalent per day (MBOED), on an adjusted basis, this year, excluding Libya.
“We had expected production at these spending levels to remain relatively flat, so the growth outlook is incrementally positive,” said RBC Capital Markets analysts.
(Reporting by Anet Josline Pinto and Darshana Sankararaman in Bengaluru; Writing by Swetha Gopinath; Editing by Sriraj Kalluvila and Shounak Dasgupta)
This article was written by Anet Josline Pinto from Reuters and was legally licensed through the NewsCred publisher network.