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With the prospect of another plunge in crude prices looming after two months of stability, US shale oil producers may face another round of spending cuts to conserve cash and survive the downturn.
A deeper retrenchment would have far-reaching effects.
Additional cutbacks would further gut the already-haemorrhaging oilfield services industry and may heighten expectations for a steeper drop in US crude output later this year.
They would also reinforce the United States' emerging role as the world's "swing producer," with dozens of independent companies that can quickly ramp up production in good times and dial it back in a downturn.
"If I were an oil company today, I would talk about one thing: how far can you cut costs," said Fadel Gheit, an oil analyst at Oppenheimer in New York. "They cannot control anything else." Gheit said he expected a new wave of capital budget cuts starting in May, when much of the energy industry reports quarterly results.
US oil companies have slashed spending 20 to 60 per cent since the price of oil fell by half from June to January, and oilfield services firms shed more than 30,000 jobs, according to Reuters compilations of public disclosures.
Debt rating agency Moody's estimates that about a fifth of the North American exploration and production companies it follows will slash budgets by more than 60 per cent this year while more than half will cut spending by at least 40 per cent. After a pause brought a sense of relief, the price slide has resumed. US benchmark WTI has fallen 12 per cent in a week to $42 on concerns about lingering global oversupply. Citibank and Goldman Sachs have said oil could tumble to $30 or even $20.
One Houston banker said acquisition chatter has picked up in the past two weeks but that no company wanted to be the first to seek buyers given potential investors and sellers remain wide apart on valuations.
