Occidental Petroleum Corp. Chief Executive Officer Stephen Chazen said companies that help explorers find and drill for oil will lower their fees to maintain market share if crude prices continue to slump.
Benchmark U.S. crude futures have dropped 24 percent since reaching this year’s high on June 20. Baker Hughes Inc. and Schlumberger Ltd., two oilfield-services companies, said last week that prices would need to drop further and stay there longer before customers would start to cut back spending.
Occidental is waiting until the first quarter to finalize and announce capital spending plans for 2015, in part to assess how long and deep the current crude-oil bear market will be, Chazen said during a conference call with analysts yesterday.
Oil production margins won’t be as severely squeezed as some observers are predicting because the drilling companies will have to cut fees to retain customers, Chazen said during the call. “We expect, since the service competitors were happy to raise prices when oil was going up, that they will be just as happy to have their prices lower in the future.”
Brent oil, a global benchmark that has approached four-year lows in the past week, rose 2.5 percent to $86.83 a barrel on the London-based ICE Futures Europe exchange yesterday, the steepest one-day gain since June 12. West Texas Intermediate also climbed yesterday on news Saudi Arabia cut output in September, settling at $82.09.
Baker Hughes has said oil would have to fall to $75 a barrel and stay there for a few months before producers would start cutting their spending.
Occidental and other producers have been squeezed by a slide in crude prices driven by a glut of North American supply and reduced forecasts for demand growth. Chazen declined to predict if or when the crude market will rebound.
“If I could predict oil prices, I would be sitting on a beach in Galveston, wouldn’t come to work, and wouldn’t mess with this production business,” he said. “As a practical matter, this is a volatile time.”
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