California-based Chevron Corp. , whose upstream arm is based in Houston, has joined a growing list of oil and gas producers that have announced multibillion-dollar cuts for the year.
Chevron is shedding 20 percent of its capital expenditure budget for 2020, landing at $16 billion for the year, according to a March 24 press release.
The reductions will come from a number of places across Chevron’s portfolio, but the largest reduction comes from its upstream unconventional arm, primarily in the Permian Basin. That part of the business is cutting $2 billion in planned spending.
Some of the other cuts include $700 million from the company’s upstream projects and exploration arm, $500 million from its base upstream business, and $800 million from other places, including its downstream and chemicals portfolio.
Chevron’s cash capital and exploratory expenditures are dropping by $3.3 billion, ending up at $10.5 billion for 2020, of which $7 billion is expected in the second half of the year.
“The flexibility of our capital program allows us to respond to these unexpected market conditions by deferring short-cycle investments and pacing projects not yet under construction,” Jay Johnson, executive vice president of the upstream business, said in the press release. “At the same time, we are focused on completing projects already under construction that will start up in future years while preserving our capability to increase short-cycle activity in the Permian and other areas when prices recover.”
Chevron has also cut short its $5 billion share repurchase program. The company had already repurchased $1.75 billion in shares during the first quarter, according to the press release. Meanwhile, Chevron said it’s still moving forward on a reduction in operating costs of more than $1 billion by the end of 2020.
The spending reductions come as anticipated increased supply from OPEC and decreased demand due to the COVID-19 pandemic put enormous downward pressure on oil prices.
Chevron is one of many companies right now making massive cuts to 2020 spending plans. Total SA, a French upstream company whose U.S. headquarters is in Houston, announced a multibillion-dollar spending cut on March 24.
Chevron produced $146.51 billion in 2019 revenue, which translated to $2.85 billion in net income, according to the company’s most recent annual financial report.
Source: Houston Business Journal