Chevron Slashes Spending Plans as Coronavirus Hammers Oil Demand
December 03 2020 - 9:09AM
Dow Jones News
By Christopher M. Matthews
Chevron Corp. said it would cut its annual capital spending
budget by 26% next year and sharply through the middle of the
decade, as the coronavirus pandemic forces an industrywide
reappraisal of fossil-fuel investment.
Chevron said it would spend $14 billion in 2021 and between $14
billion and $16 billion a year through 2025. It previously said it
would spend between $19 billion to $22 billion a year through 2024
before the pandemic, while returning as much as $80 billion to
shareholders over that period.
The reductions by the U.S. oil giant follow those announced this
week by rival Exxon Mobil Corp., which on Monday said it was
reducing its yearly capital spending by about $5 billion to $10
billion each year through 2025. Exxon, which has lost more than
$2.3 billion over the first three quarters of this year, also said
it would slash the book value of its assets by up to $20
billion.
Chevron has lost nearly $5 billion this year, but unlike Exxon
has managed to avoid taking on large amounts of new debt due to a
relatively strong balance sheet. The company's share price is down
about 5% over the last six months, and closed at $89.87
Wednesday.
"Chevron remains committed to capital discipline with a 2021
capital budget and longer-term capital outlook that are well below
our prior guidance," Chevron Chief Executive Michael Wirth
said.
Covid-19 has gutted demand for oil and gas as automobile and
plane travel declined sharply amid global lockdowns and other
measures to contain the virus. Chevron has let its production slide
due to the weakened demand, choosing to give priority to directing
its cash flow to dividend payments. It reiterated Thursday its
commitment to its dividend.
Even before the pandemic, the fossil-fuel industry was
contending with an oversupply of oil and gas unleashed by U.S.
frackers, increased competition from renewable-energy sources and
electric vehicles, and the prospect of increased climate-change
regulation around the world.
Since the end of last year, Chevron has been implementing a
year-long restructuring of its operations in response to an
anticipated period of prolonged low commodity prices. It is in the
process of cutting up to 15% of its 45,000-person staff.
Chevron said it would increase investments in its stronger
assets, including offshore drilling in the Gulf of Mexico and in
U.S. shale, including in the Permian Basin in New Mexico and Texas.
It also said it would invest $300 million in projects related to
transition to a lower-carbon-energy economy.
(END) Dow Jones Newswires
December 03, 2020 08:54 ET (13:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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