ConocoPhillips said Thursday it would increase its dividend but reduce deepwater exploration spending, its latest cut, because of low oil prices.
The Houston-based oil company’s dividend is now 74 cents instead of 73 cents and is expected to cost an additional $12.3 million a quarter.
The most significant spending reductions will come from its program in the Gulf of Mexico where ConocoPhillips will terminate its contract for the Ensco DS-9 deepwater drill ship. Drilling was scheduled to begin there later this year.
Financial terms weren’t disclosed. ConocoPhillips will pay a termination fee that represents up to two years of contract day rates and will take a special item charge for the termination in the third quarter.
“Since the start of the oil and gas price downturn last year, we have moved decisively to position ConocoPhillips for lower, more volatile prices by exercising capital flexibility and reducing operating costs across our business,” said Chief Executive Ryan Lance. “Our decision to reduce spending in deepwater will further increase our capital flexibility and reduce expenses without impacting our growth targets. This strengthens our ability to achieve cash flow neutrality in 2017 even if lower commodity prices persist.”
ConocoPhillips was the first big U.S. oil producer to slash its 2015 capital spending to deal with the plunging price of crude. In March, it said it would curb capital spending through 2017 to reflect expectations that commodities prices will remain volatile. ConocoPhillips has said it would cut back on exploring for new sources of oil and gas, as well as on drilling in some shale formations in North America, including the Niobrara in Colorado.