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Image courtesy of Hess.

Hess slashed its 2016 exploration and production capital and exploratory budget by 20 percent on Tuesday, citing low oil prices.

The New York-based company now plans to spend $2.4 billion on exploration and production activities this year, a 40 percent reduction from 2015 levels and about 20 percent below the company’s preliminary 2016 guidance.

Twenty percent of the budget, or $470 million, has been allocated for unconventional shale, $610 million, or 25 percent of the budget, has been allocated for production and $820 million, or 34 percent of the spend, has been allocated to developments.

Hess also earmarked $500 million, or 21 percent of its 2016 budget, for exploration and appraisal activities.

As part of the company’s unconventional spend, Hess has earmarked $425 million to operate two rigs and bring 80 new wells online in the Bakken shale play in North Dakota.

The company will also spend $45 million to drill five wells and bring 14 new wells online in the Utica shale play in Ohio during the first quarter of 2016.

Hess added that the rig will be released after the Utica wells are complete.

Just over half of the production budget will go towards production activities in the deepwater Gulf of Mexico, including the drilling and completion of a production well and completion of a water injection well at the Tubular Bells field, a production well at the Conger Field and a water injection well at the Shenzi field.

Hess holds a 57.1 percent operating stake in Tubular Bells, a 37.5 percent operating stake at the Conger field and a 28 percent stake at Shenzi.

The company has allocated $140 million of its production budget to complete the current stage of the Phase 3 drilling campaign at its operated South Arne Field in Denmark by the end of the first quarter and for operations at the BP operated Valhall Field in Norway.

As part of its exploration and appraisal budget, Hess plans to spend $250 million to drill up to four wells on the Stabroek Block in offshore Guyana that include evaluating the Liza discovery, a drill stem test and additional exploration activities.

The company also plans to spend $175 million for drilling in the deepwater Gulf of Mexico including an appraisal well to delineate the Chevron operated Sicily discovery, an exploration well at the ConocoPhillips operated Melmar prospect, a large Paleogene four way structure in the Perdido Fold Belt, and other exploration activities

The majority of the overall budget has been allocated to activities in the United States, with that region receiving $1.4 billion.

The company plans to spend $140 million in Europe, $40 million in Africa and $820 million in Asia and other regions.

Hess’s net production is forecast to average between 330,000 and 350,000 barrels of oil equivalent per day this year, unchanged from the company’s preliminary guidance issued in October.

The company’s Bakken net production is forecast to average between 95,000 and 105,000 barrels of oil equivalent per day in 2016.

“We take a long term view to managing our business and we will continue to invest in our growth projects and prospects, including exploration and appraisal activities. However, in response to the current low oil price environment, we have significantly decreased our 2016 capital and exploratory expenditures and we plan to reduce activity at all of our producing assets,” Hess president and COO Greg Hill said.

Hill added that the company will “continue to pursue further cost reductions and efficiency gains across our portfolio.”