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Oil Major Chevron Slashes Spending Plans Following COVID Crisis

Chevron Corporation is reducing its capital and exploratory budget for the next five years by billions of U.S. dollars compared to previous guidance as it looks to save its dividend payouts in the post-pandemic world.

Chevron plans a capital and exploratory budget of $14 billion for 2021 and cuts its annual capital expenditure (capex) guidance for 2022-2025 to between $14 billion and $16 billion, the U.S. supermajor said on Thursday.

Chevron’s previous capital guidance for the longer term was between $19 billion and $22 billion, which excluded Noble Energy.

This year alone, after the collapse in oil prices in March, Chevron cut its capital program 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. In May, Chevron said in its Q1 earnings report that it was further reducing its 2020 capex guidance by up to $2 billion to $14 billion.

Next year’s investment is set at $14 billion, while the supermajor will not be spending more than $16 billion a year until 2025, as per its latest guidance from Thursday.

Throughout 2025, Chevron expects capital to decrease for a major expansion in Kazakhstan, but it plans to boost investments in its “world class position in the Permian,” as well as in other unconventional basins and the U.S. Gulf of Mexico.

“Chevron is in a different place than others in our industry,” Chevron’s chairman and chief executive Michael Wirth said in a statement.

“We’ve maintained consistent financial priorities starting with our firm commitment to the dividend. We took early and swift action at the beginning of the pandemic to prudently allocate capital, reduce costs and protect our industry-leading balance sheet. And we’ve completed a major acquisition and restructuring that positions our company to deliver higher returns and grow long-term value,” Wirth added.

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Earlier this week, the other U.S. supermajor, Exxon, said it would spend between $16 billion and $19 billion next year as it finally announced massive writedowns of between $17 billion and $20 billion due to the pandemic and its effect on the oil industry.  

By Tsvetana Paraskova for Oilprice.com

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