By Braden Reddall
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
"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
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
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
"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.
But operational health is not the only concern. Russia's gas industry, while enjoying good prices, is being squeezed by a shortage of finance, Gazprom
Asked about what projects $70-a-barrel oil will threaten, Deaton at Baker Hughes expected clients in the declining fields in the waters near Britain could feel the impact hardest.
"The UK could be one that we'd have to watch," he said on a conference call with investors. "Fortunately, right now we are extremely busy in Norway ... which is pretty handy to support out of the UK."
The Baker Hughes results follow those of larger rivals Schlumberger Ltd
Baker Hughes expects some 200 rigs to be idled this quarter alone, out of 2,400 operating at the end of September in North America, due to tighter credit and lower energy prices.
But that decline would only put profit margins back where they were in the first quarter of the year, before the industry began increasing the number of rigs in operation.
"The next 200 rigs are the ones that are going to hurt a little bit more," Deaton said.
Another big U.S. oilfield services company, Weatherford International Ltd
(Editing by Andre Grenon)
