Newspaper article THE JOURNAL RECORD

Phillips Cuts Capital Spending Budget 30% / Some Crude Oil Futures Prices below $14

Newspaper article THE JOURNAL RECORD

Phillips Cuts Capital Spending Budget 30% / Some Crude Oil Futures Prices below $14

Article excerpt

A 30 percent reduction in the 1986 capital spending budget because of lower oil prices was announced Thursday by Phillips Petroleum Co. of Bartlesville, Okla.

The reduction, according to C.J. Silas, chairman and chief executive officer, will reduce the capital spending budget by $400 million to $1 billion.

The announcement came as futures prices fell below $14 Thursday on the New York Mercantile Exchange. Contracts for March delivery of crude oil hit $13.85 a barrel at one point.

In other oil price related activity Thursday:

- Posted prices in Oklahoma ranged between $17 and $18 a barrel for sweet crude, said Melvin Moran, of Moran Oil Co. in Seminole.

- The spot price for West Texas crude oil closed at $14.20 Thursday, down from a closing price of $15.10 Wednesday and $14.80 Tuesday.

- At least four oil companies lowered their posted price for crude oil.

- Venezuelan Oil Minister and OPEC President Arturo Hernandez Grisanti said non-OPEC producers Mexico, Egypt, Oman, China and the Soviet Union are "willing to help OPEC restore stability to theoil market," according to a report by the OPEC news agency.

Phillips has allocated 64 percent is allocated of its remaining capital spending budget for exploration and production projects, said Silas.

However, the company may not spend all of that, he said.

"With the oil market still in a state of turmoil," Silas explained, "it's difficult to predict at this point how much of this budgeted amount we will actually spend.

"We may well end up spending less than we budgeted - as we did in 1985."

Phillips capital expenditure budget in 1985 was $1.4 billion, of which $1.1 billion was actually spent.

"We feel prudent management at this point calls for maintaining a very flexible position," Silas said. "Until the future direction of oil prices is in clearer focus, we are going to be very cautious about making long-term commitments or undertaking major new projects.

"We want to avoid any overreaction one way or another that might restrict us in the future."

Silas also noted that Phillips reduced its total debt by $1.8 billion in 1985, with an emphasis on paying down short and medium-term obligations.

Consequently, he said, the company is not burdened with large principal payment requirements on its remaining debt for the next six years.

The 1985 debt reduction was accomplished through asset sales, cuts in capital expenditures and significant costy reductions. Asset sales either completed, contracted for or agreed to in principle, reached $1.4 billion in 1985.

An additional $200 million worth of assets, including the company's petrochemical properties in Belgium have been sold or contracted for sale since the beginning of the year.

The company has said its Canadian assets are no longer for sale but that the company still intends to complete its $2 billion sales program. …

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