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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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The Texas Oil Production Cut Plan Is Dead

Ryan Sitton, the Texas Railroad Commissioner who first floated the idea of state-mandated oil production cuts, has thrown in the towel after failing to convince his two co-commissioners of the need for mandatory cuts.

Sitton first suggested that Texas could join OPEC and other producers in curbing oil production purposefully in March. However, the industry had a mixed reaction to the proposal. While some backed it, such as Parsley Energy and Pioneer Natural Resources, others were firmly against it, notably the supermajors Exxon and Chevron, which have more abundant cash resources to hold out during the oil price crisis.

Yet it seems the industry is already cutting production at fast enough rates that would negate the need for a mandatory output curb.

“This is dead,” Sitton told Reuters about his production cut plan. “What we should have done six weeks ago now would no longer have the right impact. We lack the leadership between the three commissioners to get that done.”

In April, as the Commission was discussing the cuts, Oilprice.com’s Tom Kool noted that all three Texas Railroad Commissioners lacked any experience with mandatory cuts, and there were too many questions to answer before making a decision. 

Many shale companies, meanwhile, are already cutting production. In North Dakota, production has fallen by as much as 400,000 bpd since the start of March, Reuters reported this week, which is almost a third of the state’s total. More well shut-ins are expected as oil prices remain lower than breakeven levels.

Production cuts are underway in the Permian, too. Bloomberg reported this week that companies were preparing to reduce their output there by between 10 and 40 percent and suspend all drilling operations. Some of these companies were among the staunchest opponents of a mandatory production cut, Bloomberg’s Rachel Adams-Heard and David Wethe noted.

Even Exxon, Conoco, and Chevron are cutting: the three supermajors plan to reduce their combined production by 660,000 bpd by the end of June.

The total production cut across the U.S. was 1 million bpd in late April.

By Irina Slav for Oilprice.com

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  • Maxander on May 05 2020 said:
    Although oil majors like Exxon & Chevron didn't formally announce production cut, their Capex cut plans indirectly indicate slowdown in production activity ahead.

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