Conoco slashes budget, cutting 4 percent of jobs

HOUSTON (Reuters) - ConocoPhillips , citing a steep decline in oil and gas prices, said on Friday it will slash its capital spending 38 percent this year and cut about 1,300 jobs at the third-largest U.S. oil company.

Conoco said the price decline will also affect its year-end reserves and prompt big writedowns on the value of some of its exploration and production assets.

"As a general comment, this is more draconian than I expected," said Phil Weiss, oil analyst at Argus Research.

Shares of Conoco fell about 2 percent in extended trading from their $49.38 close on the New York Stock Exchange.

Energy companies have suffered a double blow from a sharp drop in crude oil and natural gas prices and the global economic slowdown, which has cut into demand.

On a year-over-year basis, crude oil prices have fallen more than 50 percent, while natural gas prices have tumbled 25 percent.

Conoco set its 2009 capital expenditures at $12.5 billion, a budget the company said was ample to fund large development projects.

In 2008, Conoco was projected to spend $20.3 billion, including $5 billion that the company paid for a stake in Australia's Origin Energy , that was not included in the company's initial to spend $15.3 billion.

The oil company said it will consider increasing its dividend and capital program as market conditions warrant.

Conoco, which employs 33,600 people worldwide, said it will also cut its contractor head count.

Citing the decline in commodity prices and weakness in global equity markets, the Houston-based company will take a $25-billion impairment charge related to its exploration business.

Conoco also said it will reduce the book value of its 20 percent equity investment in Russian oil major Lukoil by $7.3 billion after taxes and record other asset impairments totaling $1.3 billion on the venture.

Others have not been immune to the energy downturn. Chevron Corp , the second largest U.S. oil company behind Exxon Mobil Corp said earlier this month that its fourth-quarter earnings will be significantly lower than the previous quarter.

And Schlumberger Ltd , the world's largest oilfield services company, said last week it was cutting 5 percent of its North American workforce in a bid to cut costs.

(Additional reporting by Braden Reddall in San Francisco; editing by Tim Dobbyn)

WhatsAppFacebookTwitterLinkedinBeloudBluesky