Exxon cuts spending by $ 10 billion with falling oil prices

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ExxonMobil is limiting capital spending this year by $ 10 billion, quantifying on Tuesday the investment cuts announced last month in response to demand for oil and the collapse in oil prices. The most significant reductions will take place in the Permian basin.

Shortly after the collapse in oil prices in early March, Exxon said it was looking to “cut spending significantly due to market conditions caused by the COVID-19 pandemic and falling commodity prices” .

The US super-major quantified this “significant reduction” on Tuesday, saying its capital investment for 2020 should now be 30% lower, at around $ 23 billion, down from previously announced investments of some $ 33 billion. of dollars.

Exxon will also reduce operating expenses in cash by 15%, through deliberate actions to increase efficiency and reduce costs.

“Most of the reduction in capital spending will be in the Permian Basin, where short-cycle investments can be more easily adjusted to meet market conditions while preserving long-term value. Reduced activity will affect the pace of drilling and completion of wells until market conditions improve, “said Exxon, echoing the strategy of the other US super-major, Chevron.

Two weeks ago, Chevron said it was cutting investment spending, particularly in the Permian, and stopping its share buyback program. Chevron puts an end to its 2020 capital expenditure plan of $ 4 billion, or 20%, to $ 16 billion, to protect its dividend and its balance sheet in one of the worst oil price drifts in memory recent. Of the $ 4 billion in investment spending, Chevron will reduce unconventional upstream investment by $ 2 billion, primarily in the Permian Basin.

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Exxon has now followed Chevron is reducing investment in the basin, which was their main objective to boost production in the years to come. All the great masters have announced spending cuts in the past few weeks after oil prices collapsed from the shock of demand hit by the coronaviruses and the supply-price shock of the price war.

Development of the Permian and oil off Guyana is still part of Exxon’s long-term growth plans, but the super-major delayed the final investment decision in the liquefied natural gas (LNG) project of Rovuma in Mozambique, which was expected later this year.

“Our capital allocation priorities also remain unchanged. Our goal is to continue to invest in industry-advantaged projects to create value, preserve cash for the dividend and make proper and prudent use of our balance sheet, “said the President and Chief Executive Officer of Exxon, Darren Woods.

Unlike its competitors, Exxon has continued spending in recent years to increase production, but it has also accumulated higher debt along the way.

By Tsvetana Paraskova for Oilprice.com

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