ConocoPhillips announced its 2016 operating plan. The 2016 capital budget of $7.7 billion represents a 55% reduction compared with 2014 capital spending and a 25% reduction compared with expected 2015 capital spending.
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This includes funding for base maintenance and corporate expenditures, development drilling programs, major projects, and exploration and appraisal spending.
Reductions compared with expected 2015 capital spending of $10.2 billion come primarily from lower major project spending, deflation capture and efficiency improvements.
By category, capital is allocated with approximately $1.2 billion, or 16 percent, to base maintenance and corporate expenditures; $3.0 billion, or 39 percent, to development drilling programs; $2.1 billion, or 27 percent, to major projects; and $1.4 billion, or 18 percent, to exploration and appraisal.
Chairman and chief executive officer Ryan Lance commented, "We’re setting an operating plan for 2016 that recognizes the current environment, which remains challenging. We are significantly reducing capital and operating costs, while maintaining our commitment to safety and asset integrity.
"We also retain the flexibility to adjust capital spending in response to market factors. Our plan highlights the actions we accelerated over the past year to position our company for low and volatile prices.
"As we enter 2016, ConocoPhillips has greater capital flexibility, a more competitive cost structure, a streamlined portfolio and the ability to deliver profitable growth from a high-quality resource base.
"These advantages, coupled with our strong balance sheet, give us the ability to maintain a compelling dividend and close the gap on cash flow neutrality across a range of prices.”
The company also announced it expects to close approximately $2.3 billion of non-core asset sales.
This number includes approximately $0.6 billion from transactions that closed through the first three quarters. The remaining $1.7 billion represents transactions with definitive agreements in place that are expected to close in the fourth quarter of 2015 or the first quarter of 2016.
Production from these assets, of which 80 percent is natural gas, accounts for more than 70 thousand barrels of oil equivalent per day (MBOED) of 2015 production. The company continues to pursue ongoing, non-core asset sales across the portfolio. ■
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