U.S.-based oil & gas operator W&T Offshore has reduced its capital expenditure budget for 2020 and that it has added natural gas costless collars to its hedging portfolio.
Following suit of other oil and gas operators, which have taken measures to reduce its spending due to the sudden decline in oil prices caused by supply and demand pressures, W&T Offshore said on Tuesday that the company had decided to move forward with reducing its 2020 capex to the range of $15-$25 million from its prior level of $50-$100 million.
It also reduced its planned asset retirement expenditures to $10-$20 million from $15-$25 million. W&T did not change its 2020 annual production guidance of 47,100 to 52,100 barrels of oil equivalent per day nor any of the other components of its guidance.
According to the company, the reduction in its budget will have minimal impact on expected production in 2020 and will be maintaining its prior production guidance because of a low decline profile of the company’s conventional asset portfolio in the Gulf of Mexico.
Tracy W. Krohn, W&T’s chairman and CEO, said: “During our recent earnings conference call, we discussed the significant flexibility we have to adjust our capital spending up or down at any time since we have no long-term rig contract commitments or drilling obligations.
“In addition, we are reducing our asset retirement expenditures and we are evaluating ways to reduce operating and G&A expenses that will not compromise safety or our operational capabilities. We also recently enhanced our hedge book by adding natural gas costless collars to help us protect more of our cash flow from future downward pressure while providing the potential to capture upside gains.
“These actions provide us with maximum financial flexibility and allow us to remain cash flow positive in a lower price environment. At the midpoint of our updated 2020 capital budget, we expect to remain cash flow positive at or above $25 per barrel of oil and $1.50 per thousand cubic feet of natural gas. While our 2020 drilling program will now proceed at a slower pace, we remain confident in our strong drilling inventory.”
It is worth noting that W&T recently added natural gas Henry Hub costless collars on 40,000 mcf per day of production for the period April 1, 2020, through December 31, 2022, with a floor of $1.83 per mcf and a ceiling of $3.00 per mcf.
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