US oil producers to cut spending not production

US oil companies stocks have been hammered by 50% price drop in the commodity but undercurrent show that most companies would be able to pass through this storm.

• US to become a dominant player in the oil market should the companies are able to make themselves more cost efficient. The companies are required to bring down the overall cost to match other low cost producers.
• Average cost of production in OPEC is about $45/ barrel and for Saudi Arabia it is $25/barrel. US companies namely shale for which production cost runs in $75/barrel, need to be more cost effective to compete.

Good news from US companies -

Planned expenditure is being cut across industry but at a varied pace however majority of the companies confirmed their intention to raise production or at least maintain it to previous year's level.

• Apache has planned to reduce expenditure by 70% but keep production at same level that of 2014.
• Marathon oil will cut expenditure by 40% but boost production by 6%.
• EOG resources is planning to cut both expenditure and production by 40% and 3%.
• ConocoPhillips will boost production by 3% but cut capital spend by 30%.
• Similarly Anadarko, Devon will reduce both whereas occidental and Chesapeake vowed to boost production.
• EnCana has decided for most production cut close to 14% whereas Hess will be raising it by 12%.

Oil stocks are good for pickup, as they run cheap. Big and well established ones are expected to survive this major downturn. In such a case return would be quite handsome.