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Hess will slash its drilling operations in the Bakken, dropping from six rigs to one by the end of May in response to the ongoing Russia-OPEC price war.

The move will fuel the bulk of an overall $800 million reduction in planned 2020 capital expenditures for exploration and production, bringing the company’s overall capital spending to $2.2 billion.

Under this budget, Hess will put off most discretionary exploration and offshore drilling activities, excluding Guyana.

While it will operate only one rig in the Bakken, this will cause only a 5,000 barrel per day drop in production, according to the company’s guidance. The company still expects to produce 175,000 barrels of oil equivalent per day in 2020 from Bakken wells, versus the previous guidance of 180,000.

Overall production will be fall between 325,000 to 330,000 barrels of oil equivalent per day, excluding Libya, versus the previous guidance of between 330,000 to 335,000 barrels per day.

The company’s CEO John Hess said the company’s financials remain strong. The company entered 2020 with more than $1.5 billion in cash and cash equivalents on its balance sheet and still has access to $3.5 billion in an undrawn revolving credit facility. It has no significant debt maturities until 2027.

The company has also negotiated a new $1 billion, three-year term loan agreement with JP Morgan, to strengthen the company’s cash position and financial liquidity in the face of the sharp decline in oil prices.

Eighty percent of the company’s 2020 production is hedged with put options. About 130,000 barrels per day are hedged at $55 per barrel WTI put options, and 20,000 barrels per day at $60 per barrel Brent put options.

“With 80% of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three-year loan agreement, our company is well positioned for this low price environment,” Hess said. “Our focus is on preserving cash and protecting our world class investment opportunity in Guyana.”

Hess is generally among the Bakken’s top five producers. It is the latest in a string of Bakken oil and gas companies to announce capex cuts in light of the ongoing price war between Russia and OPEC.

ONEOK has decreased its capital spending by $500 million due to the current price environment. That will postpone expansion of the Demicks Lake gas plant, and will reduce the scope of its new NGLs pipeline, Elk Creek. Both projects can be quickly resumed, company officials said.

Marathon Oil announced a $500 million cut to capex. Most of its cuts will be in Oklahoma and the Delaware Basin. In the Bakken and Eagle Ford it will “optimize.”

Liberty Oilfield Services also announced that members of its executive team have voluntarily requested a base salary reduction of 20 percent while the company evaluates further cost-cutting measures.

The Russia-OPEC price war comes at a time when the world was already oversupplied with oil, and faced declining demand due to the spread of a virus that causes COVID-19 or coronavirus.

North Dakota’s top oil and gas regulator said on Tuesday that the situation is similar to what happened in 2015. North Dakota Department of Mineral Resources Director Lynn Helms said he ran multiple production scenarios, and still doesn’t expect the current situation will drop North Dakota’s production below 1 million barrels per day.

“The 2008 price collapse was a couple of years, and the 2015 one was two, two and one half years,” Helms said. “The 2001 price collapse, which some people believe this is more like that one, that recovery was about a year.”

Bakken barrels have some advantages in the current price war, Helms added.

“The vast majority of our 3 million exports, about 1.5 million of that is from the Permian,” Helms said. “It’s the 3 million in U.S. exports that are going head to head with Saudi Arabia. Those will be the most vulnerable barrels, and those are Permian barrels. So relative wise, we have some competitive strengths.”

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