Michael Wirth, CEO, Chevron, speaking at the World Economic Forum in Davos, Switzerland, Jan. 23, 2020.
Adam Galasia | CNBC
Chevron will slash capital spending by $4 billion this year and suspend share buybacks, the latest oil company to cut costs in the face of an unprecedented slide in oil prices.
Oil has crashed by more than 60% since January, hit by global demand destruction from the coronavirus pandemic and a price war between Saudi Arabia and Russia.
The second-largest U.S. oil firm said it would spend $16 billion instead of a planned $20 billion this year, including halving spending in the Permian Basin, the top U.S. shale field. It now expects to pump about 125,000 barrels of oil and gas per day in the Permian Basin by the end of this year, down 20% from earlier plans.
This is the first indication from an oil major of how sharply it would pull back spending in the Permian field, output from which has helped the United States become the world’s largest oil producer.
Chevron will cut $2 billion from its Permian spending, from an expected pace of $4 billion to $5 billion per year.
Royal Dutch Shell on Monday said it would cut spending by $5 billion and suspend its $25 billion share buyback plan.
Exxon Mobil, the largest U.S. oil company, has not released its new spending plan but said cuts would be “significant”, while Norway’s Equinor has also reduced its share buyback program.
Chevron’s spending cuts were “much deeper than expected,” RBC Capital Markets analyst Biraj Borkhataria said, adding that the suspension of share buybacks was in line with expectations.
The $5 billion annual repurchase program was halted after $1.75 billion of shares were bought back during the first quarter.
Earlier this month Chevron had promised to keep its spending in check and return up to $80 billion to shareholders over the next five years.
“Our focus is on protecting the dividend, prioritizing capital that drives long-term value, and supporting the balance sheet,” said Chief Financial Officer Pierre Breber.
Chevron shares closed on Monday at $54.22, down 8.7%, but were up 6.7% in premarket trading to $57.80.