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The last days of 2015 saw two of the largest international oil companies (IOCs), Chevron and ConocoPhillips, confirm details of swingeing cuts to their exploration budgets for 2016 as oil prices continue to slide. Cost cutting is not restricted to private sector firms, with national oil companies (NOCs) also seeking to cut waste. Despite major Gulf producers such as Saudi Arabia and the UAE cutting expenses, drilling continues at record levels as services firms’ profit margins feel the squeeze.
For Chevron, spending in 2016 is down across the board, with the heaviest cuts falling on the upstream. CEO John Watson presaged this in the firm’s end-October Q3 earnings: “downstream earnings remain strong” but lower prices have “depressed upstream profitability,” he said, adding that he expected “capital and exploratory expenditures for 2016 to be $25-28bn.” In the end the firm split the difference announcing a figure of $26.6bn on 9 December, down 24% for the 2015 plan.
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