Exploration down: XTO cuts budget.
XTO cuts exploration budget
Fort Worth-based XTO Energy is cutting its development and exploration budget this year as well as its pipeline budget because of weak natural gas prices.
XTO said today it now expects to spend $2.75 billion this year on development and exploration, down from its earlier budget of $3.3 billion. Its $500 million budget for pipeline infrastructure, compression and processing has been lowered to $450 million.
Despite the cuts, the company said it plans to increase production volumes by 14% over last year.
Other natural gas companies, including top producer Chesapeake Energy, also have been cutting budgets as natural gas prices have tumbled along with oil. Gas prices hit a 29-month low of $4.28 per 1,000 cubic feet yesterday before rebounding.
"As drilling activity across the industry collapses, we will concentrate on managing falling costs to maximise returns and unit margins," XTO head Keith Hutton said in a statement.
XTO also said it has realised about $1.3 billion before taxes after entering into early settlement and reset arrangements with respect to another 33% of its commodity hedge volumes this year. The money will be used to reduce debt.
The company said the net effect of the early settlement is to accelerate cash receipts while keeping its full hedge position.
Shares of XTO climbed 51 cents to $36.54 in morning trading.