Private equity-backed gas producer Neptune Energy plans to cut its budget for development projects by around $300 million this year and will not pay a cash dividend to its owners Carlyle and CVC Capital Partners, it said on Tuesday.
Following the collapse in oil prices, UK-based Neptune said it now expects its spending on development projects to total $750 million to $850 million this year and its future exploration plans for 2020 were under review.
In November, when oil prices stood at around $63 per barrel, Neptune forecast it would spend between $1 billion and $1.1 billion on developing projects in 2020. On Tuesday the oil price stood at around $23 a barrel.
The company said it expects annual production of between 145,000 and 160,000 barrels of oil equivalent, which at the lower end would be flat on last year.
Neptune was formed when its owners acquired oil and gas assets in 2017 from French Engie for $3.9 billion, one of a number of deals that moved fields from major producers into the hands of small private groups.
The suspension of the dividend highlights the challenges in monetizing such investments as appetite for energy initial public offerings is low and some deals have ground to a halt as buyers were not willing to satisfy price expectations.
Oil and gas producers across the globe have slashed their budgets on the back of the price slump. For 2018, Neptune paid out $380 million to its shareholders and $200 million for 2019.
Last year it spent $825.5 million on development projects and had an operating cash flow of $1.3 billion, slightly above the previous year. It had a cash pile of $1.3 billion at the end of 2019 to pay for development projects and potential acquisitions.
It cost Neptune $10.3 to produce a barrel of oil equivalent last year and it expects this to stay stable this year.
It hedged around 27% of its 2020 oil production at a floor price of $60 a barrel and 84% of its gas output at $6 per million British Thermal Units.
(Reporting by Shadia Nasralla; Editing by Susan Fenton)