Occidental to shed costs, cut DJ production

HOUSTON — Occidental Petroleum Corp. (NYSE: OXY) plans to cut costs and oil production in the Denver-Julesburg Basin, the company announced Wednesday.

Spending in the basin is expected to drop oilfield spending to $300 million for the year, a third of what the company initially budgeted. In total, Occidental aims to reduce spending across its drilling operations by $1.2 billion.

To address oversupply and historically low oil prices, Occidental is reducing production by shutting in wells.

“The number of wells we’re shutting in is about 9% of our well count” in the U.S., vice president of investor relations Jeff Alvarez said. Roughly half of those are in the DJ Basin.

No additional wells will be drilled for the remainder of the year. 

“To achieve these cost savings, we have modified our operating processes, replaced a significant number of contractors with employees and reduced executive and employee compensation,” Occidental CEO Vicki Hollub said during a conference call with investors and analysts. “We are leveraging existing inventory to reduce orders for new and replacement equipment, and we’re further consolidating vendors and we’re utilizing creative solutions such as reverse auctions to source commodities and services.”

The company, which bought Anadarko Petroleum Corp.’s DJ Basin wells last year, reported first-quarter losses of $2.2 billion, or $2.49 per diluted share. The firm’s quarterly results sent its stock tumbling 12.42% Wednesday.

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