Chevron is slashing capital expenditures, especially in the Permian, and is suspending its share buyback program, the U.S. supermajor said on Tuesday. It is the latest oil major to slash billions of capital expenditures as oil prices plummet to below breakeven levels.
Chevron is axing its 2020 capital spending plan by $4 billion, or by 20 percent, to $16 billion, to protect its dividend and balance sheet in one of the worst oil price routs in recent memory.
Of the $4-billion CAPEX cut, $2 billion will be slashed across upstream unconventionals, primarily in the Permian Basin. Another $700 million will be cut from upstream projects and exploration, $500 million from upstream base business across U.S. and international assets, and $800 million from the downstream & chemicals sector.
The supermajor also suspended its $5 billion annual share repurchase program after repurchasing $1.75 billion of shares in Q1.
Chevron’s Permian production, on which both Chevron and Exxon bet big last year, is expected to be about 125,000 barrels of oil equivalent per day, or 20 percent, below the previous guidance, Chevron said today.
“Given the decline in commodity prices, we are taking actions expected to preserve cash, support our balance sheet strength, lower short-term production, and preserve long-term value,” Chevron’s Chairman and CEO Michael Wirth said in a statement.
Chevron’s Chief Financial Officer Pierre Breber said:
“Our focus is on protecting the dividend, prioritizing capital that drives long-term value, and supporting the balance sheet.”
With CAPEX cuts and share buyback suspension, Chevron joins other major oil firms that have announced spending reductions in recent days after oil prices crashed on the coronavirus-hit demand shock and price-war-driven supply shock.
ExxonMobil said last week it was looking to “significantly reduce spending as a result of market conditions caused by the COVID-19 pandemic and commodity price decreases.”
Shell and Total announced on Monday reductions in capital expenditures and suspension of their respective share buyback programs.
By Tsvetana Paraskova for Oilprice.com
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