May 11, 2020 / 11:34 AM / 3 months ago

UPDATE 2-Continental Resources, Callon join shale peers in cutting oil output

(Adds details on activity, outlook, background)

May 11 (Reuters) - U.S. shale producers Continental Resources Inc and Callon Petroleum Co on Monday joined their peers in cutting production to cope with a rout in oil prices as the coronavirus crisis saps demand for fuel.

A month-long oil price war between Saudi Arabia and Russia and the economic fallout from the pandemic caused a historic drop in oil prices and sent shockwaves through the North American energy sector, forcing producers to drastically cut their spending and scale back on activity.

Continental said on Monday it has cut 70% of its May oil output, more than double of what it had planned earlier, and at its current rate, it expects to spend between 3% and 5% below the revised annual budget of $1.2 billion.

The company, which has slashed its budget and suspended its quarterly dividend, said it would reduce current operating rigs to four from five by the end of 2020, marking an 80% reduction from the beginning of the year.

Reuters reported last month that Continental stopped all drilling in North Dakota, shut in wells and issued a force majeure notice, an action typically reserved for situations out of a company's control, such as natural disasters.

Continental, which operates the Bakken shale spread across North Dakota and Montana and the STACK and SCOOP plays in Oklahoma, also withdrew its full-year outlook and said it was suspending further guidance due to current market conditions.

Separately, Callon said it has shut in about 1,500 gross barrels per day (bpd) through April and expects it to reach over 3,000 gross bpd during May. June volumes are currently under evaluation, the company said.

Callon also suspended its full-year outlook and said it has further reduced activity, including halting all completion activity in April and moving to only one active drilling rig by mid-May.

Reuters reported in April that Callon had hired advisers to restructure its debt pile after the plunge in energy prices soured its acquisition of rival Carrizo Oil & Gas Inc.

Reporting by Arunima Kumar and Shanti S Nair in Bengaluru; Editing by Ramakrishnan M.

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