Already hard-pressed North American oil producers were contemplating a new round of spending and drilling cuts on Tuesday as they try to quell investor concerns about profitability with crude prices now almost half of what they were in January.
The launch of a price war between Saudi Arabia and Russia drove oil prices down by about a third on Monday, sending another shockwave through an industry that has been cutting costs since the 2014-2016 price collapse.
Chevron Corp, the second largest US producer, joined Marathon Oil Corp, EOG Resources Inc Canada's Cenovus Energy Inc and several smaller oil producers revisiting their spending and production plans in light of OPEC's decision to pump full bore beginning next month.
A source close to Chevron said that while it would not be easy to cut capital spending in an already tight budget, bosses would probably look to cut drilling rigs in the Permian basin in Texas, North America's largest oilfield.
Research firm Rystad Energy predicted total industry spending on oil exploration and production would be cut by $100 billion this year and another $150 billion in 2021 if oil prices remained around $30 a barrel. The global benchmark was trading about $36.50 on Tuesday, up nearly 6% from Monday.
"(Companies) will turn every stone and cancel every single non-revenue-generating activity," Audun Martinsen at Rystad Energy said.
To cut costs, the US shale industry would likely more than halve the number of wells it had originally planned to drill this year.
Marathon Oil and oil-sands provider Cenovus Energy joined shale firms Diamondback Energy Inc and Parsley Energy Inc to unveil spending cuts that will reduce output.
EOG said it was evaluating its drilling activity and that it is in the process of finalizing specific plans.
Marathon and Cenovus also promised to cut spending by about 30% from a year earlier.
That has triggered a new price war with both countries betting they can supply the market at lower cost than U. S. shale rivals.
Shale production has soared over the past eight years, pushing U. S. output and exports to record highs, but that has come courtesy of strict limits on output which the Saudis rolled back after the collapse of OPEC talks on cuts last week.
Analysts from Canadian bank RBC said they expected drilling activity cuts by Devon Energy Corp, Concho Resources and Matador Resources.
Concho declined to comment, while Devon and Matador did not immediately respond to requests for comment.
The cost cutting will put more pressure on service companies like Halliburton, Schlumberger and smaller players like Packers Plus Energy Services that provide equipment as well as drilling and completion services to oil companies.
"If these oil prices persist, the only real discussion is whether or not to continue operations in North American land," said Ian Bryant, Chief Executive Officer of Packers Plus Energy
"We had already given price concessions to protect market share, so we're running close to breakeven in North America before the oil price crash."