May 11 (Reuters) – Energy Transfer LP is slashing at least $400 million from its 2020 capital spending budget to $3.6 billion and will consider doubling the cuts after losses caused by oil prices driven lower by the coronavirus pandemic, company officials said on Monday.
U.S. crude oil prices have fallen 60% this year as efforts to curb the spread of the novel coronavirus destroyed about a third of global fuel demand.
“As everybody knows, we’re in kind of unprecedented times that nobody could ever predicted,” said Marshall McCrea, Energy Transfer’s chief commercial officer on a first-quarter earnings call.
Among the projects facing delays from any further cuts is Energy Transfer’s plan to expand its 570,000 barrel-per-day (bpd) Dakota Access crude pipeline (DAPL), company officials said, but added that they were aiming to remain on schedule.
Flows on DAPL, which runs from North Dakota to Illinois, will likely be increased to 750,000 (bpd), said Energy Transfer Chief Financial Officer Thomas Long.
Energy Transfer is also in the process of reducing between $200 million to $250 million in costs at its corporate offices and elsewhere in the company, officials said.
The cuts follow an earnings net loss of $855 million dollars in the first quarter for the Dallas-based pipeline company.
Demand destruction caused by the novel coronavirus has resulted in a surging amount of unwanted oil since the beginning of the year, quickly filling up tanks and raising storage costs.
Energy Transfer said it has been able to ease this year’s financial blows with its storage assets, including securing 6.2 million barrels of leased capacity in the U.S. Department of Energy’s Strategic Petroleum Reserve.
“The wide and profitable contango spreads on virtually all of our hydrocarbon products is allowing us to capture significant margins utilizing our extensive network of storage assets,” said Chief Financial Officer Tom Long.
Also helping the financial picture were flows of crude transported on Energy Transfer pipelines, which increased to 4.5 million bpd in the three first months of the year compared to 4 million bpd for the same period last year.
Increased volumes were spurred by an uptick in activity out of Texas pipelines, growth in the Bakken shale basin in North Dakota and Montana and the start of service of the Louisiana-based Bayou Bridge pipeline, company officials said. (Reporting by Laila Kearney Editing by Sonya Hepinstall)
Read More: Energy Transfer slashes 2020 capex budget, will consider more cuts