Oil companies take steady, careful approach to '09
SAN FRANCISCO (Reuters) - Energy companies put on a brave face in response to rapidly deteriorating pricing on Wednesday, keeping 2009 spending plans largely steady, even as crude oil prices tumbled to a 16-month low.
Executives plan to wait for cues from clients before altering capital budgets because, even if oil prices are half that of three months ago, a $70-a-barrel range still represents a historically healthy level for production.
They will be closely watching OPEC's meeting on Friday, although a U.S. fuel inventory build-up indicated weak demand may matter more than any cartel supply cuts.
ConocoPhillips (COP.N), kicking off third-quarter reporting for big oil companies with good results, said 2009 capital expenditure would be similar to 2008.
"We want to live within our means," Chief Executive Jim Mulva said.
The shares of the third-largest U.S. oil company fell 9 percent, mostly due to the 7 percent fall in oil prices.
Oilfield services company Baker Hughes Inc (BHI.N), on the other hand, missed Wall Street estimates and its shares plunged 22 percent.
Yet Baker Hughes executives told analysts they could maintain capital spending or even raise it depending on how 2009 shapes up, and they would have a clearer view on that in the next month or so as clients set budgets.
Baker Hughes would tighten up hiring practices and reduce money tied up in working capital, which until recently had been of little concern as energy prices regularly topped new records and the industry seemed like it could not grow fast enough.
"The whole industry over the last three years has probably been less focused on inventory and receivables because everybody is growing," Chief Executive Chad Deaton said.
REGIONAL VARIATION
The steady approach of the two Houston-based companies mirrored that of Norway's StatoilHydro (STL.OL), which said cheaper oil was not affecting its projects or spending.
Indeed, much of the world looks in relatively better shape than the U.S. energy production market, where a collapse in natural gas prices in particular threatens marginal projects.
Noble Corp (NE.N), with rigs in the U.S. Gulf of Mexico, Middle East, Mexico, North Sea, Brazil, West Africa and India, reported a better-than-expected quarterly profit on Wednesday and unrelenting demand for deepwater units.
"Our outlook remains positive for the balance of 2008 and for 2009 and is driven by our unprecedented fleet backlog and the high percentage of committed days under contract for next year," Chief Executive David Williams said in a statement. Continued...
