The aftermath of the Saudi Arabia driven crash in oil prices Monday on producers and drillers is now starting to appear. And it’s looking damn ugly.

Despite the coronavirus outbreak triggering conference and concert cancellations globally, the bankers at Goldman Sachs have managed to stay the course on hosting 25 oil companies in Houston this week. The conference is comprised of oil service, energy and production, oil majors, refining companies and mid-stream players. Word out of the conference is that capital expenditure spending budgets will be slashed big-time as oil companies try to cut costs and replan for a future of much lower oil prices.

Goldman Sachs analyst Angie Sedita notes U.S. energy and production companies attending see cutting capex by 20% to 50% in 2020. Meanwhile, oil service companies have called out 20% to 50% in capex cuts this year, as well as plans to swiftly reduce headcount.

Oilfield service companies Schlumberger and Halliburton stand out as two of the more aggressive capex cutters. Sclumberger said it will reduce capex by 15% to 30%, Halliburton will cut more than its current guidance of 20%.

A Halliburton facility in Port Fourchon, Louisiana (Photo credit should read MIRA OBERMAN/AFP via Getty Images)

Most of the companies in attendance have vowed to defend their dividends. Obviously that is not the case at Occidental Petroleum. The oil company — still reeling from an ill-timed $33 billion takeover of Anadarko in 2019 — slashed its dividend for the first time in 30 years on Tuesday by nearly 90%.

Tough road ahead

Not all is doom and gloom at the conference, though it’s hard to find anything positive with the entire space being hammered.

“The upside is that many of the companies believed that while a difficult road ahead in 2020, the outcome would be: a) a more swiftly correcting oil market with U.S. production declines in 2021 estimated to be 300-500k bbls/d (vs growth), and b) a healthier industry with the potential exit of weaker players, consolidation, and more rapid attrition/scale reduction,” says Sedita.

A minor win, very minor.

Oil prices dropped by more than 20% on Monday following Saudi Arabia’s decision over the weekend to cut prices. At one point Sunday evening, crude oil futures were down about 40%. Prices have attempted to rally since, but experts that have talked to Yahoo Finance believe sub-$40 a barrel is likely for some time.

Shares of Apache fell by more than 50% on Monday, while Exxon at one point was down close to 20% on the session.

For its part, Goldman doesn’t rule out oil prices plunging to below $20 a barrel.

“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus. This is the equivalent of a 1Q09 demand shock amid a 2Q15 OPEC production surge for a likely 1Q16 price outcome. As a result, we are cutting our 2Q and 3Q20 Brent price forecasts to $30/bbl with possible dips in prices to operational stress levels and well-head cash costs near $20/bbl,” Goldman Sachs oil strategist Damien Courvalin said earlier in the week.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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