HOUSTON — U.S. oil producer Hess Corp. will cut its capital spending budget 40 percent and expects its crude output to decline this year as crude prices languish around $30 a barrel.
The New York-based driller’s $2.4 billion annual budget will fall well below the $4 billion the company invested last year and 20 percent lower than the preliminary guidance it provided in October.
The budget cut is in line with projections by Evercore ISI, Barclays and others forecasting deep spending reductions this year. Hess’s oil production won’t come off as quickly as its spending, as the company projects output will likely decline 7 percent to 11 percent this year.
“We plan to reduce activity at all of our producing assets,” Hess President and COO Greg Hill said in a statement. “Moreover, we will continue to pursue further cost reductions and efficiency gains across our portfolio.”
Hess, which has a major presence in the Bakken Shale in North Dakota, plans to spend one-fifth of its budget on shale drilling and about one-quarter on bringing its oil fields in the Gulf of Mexico and Denmark into production.
The company has set aside another $820 million to develop other assets in Malaysia and the deep-water Gulf, and $500 million for exploration and appraisal activity in the Gulf and offshore Guyana.
On Wednesday, Hess posted a $1.8 billion fourth-quarter net loss because of large non-cash charges including $1 billion in impairment charges on its exploration and production assets. The company’s production rose 7 percent in the quarter, but its revenues fell 42 percent to $1.4 billion.