Skip to main content

Flags fly outside the ConocoPhillips offices in Houston on April 30, 2019.LOREN ELLIOTT/Reuters

Top U.S. independent oil producer ConocoPhillips raised its capital budget for 2021 following its mega-deal with Concho Resources, while it warned the oil market to remain volatile in the short term as the world reels from the impact of COVID-19.

ConocoPhillips completed peer Concho’s $13.3 billion acquisition in January, making it the biggest pure shale acquisition since 2011, as lower fuel prices and demand spurred sector-wide consolidation.

While oil prices have recovered from a coronavirus-induced slump, with Brent crude hovering around $58 per barrel on Tuesday, rising infections and new travel restrictions in some parts of the world have dampened demand forecasts.

“Demand recovery is taking longer, spare supply remains and inventories remain elevated,” Chief Executive Officer Ryan Lance said in a post-earnings call, adding that “it makes no sense to grow into this market environment”.

“So, we’re choosing to stay at a sustaining level for the year.”

ConocoPhillips has set a $5.5 billion spending budget for 2021, much of which will be used to maintain current production.

Adding to the energy sector’s challenges, President Joe Biden’s administration signed a raft of executive actions to combat climate change, including pausing new oil and gas leases on federal land and cutting fossil fuel subsidies, as Biden pursues green policies he has billed as a boon for job creation.

ConocoPhillips said some of the recent actions targeting U.S. oil and gas production will have a negative economic and environmental impact on Americans.

If the drilling moratoriums become permanent, they will “negatively impact energy and national security and increase our reliance on higher GHG foreign barrels,” Lance said.

The company’s fourth-quarter production, excluding Libya, climbed 7.3 per cent to 1.1 million barrels of oil equivalent per day, sequentially.

Excluding impairments, it posted a loss of 19 cents per share, smaller than analysts’ expectations of 28 cents, according to Refinitiv IBES data.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.