ExxonMobil makes even more budget cuts

The combined impact of the COVID-19 epidemic and the plunge of crude oil prices forced ExxonMobil to make further cuts in its 2020 capital spending. The company announced Tuesday it would reduce capex by 30% and lower cash operating expenses by 15%.

Capital investments for 2020 are now expected to be about $23 billion, down from the previously announced $33 billion. The 15 percent decrease in cash operating expenses is driven by deliberate actions to increase efficiencies and reduce costs, and includes expected lower energy costs.

“After a thorough evaluation of the impacts of the pandemic and market conditions, we have worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximize cost efficiency, and put us in the strongest position when market conditions improve,” said Darren Woods, chairman and chief executive officer of Exxon Mobil Corporation.

“The long-term fundamentals that underpin the company’s business plans have not changed — population and energy demand will grow, and the economy will rebound.”

The company announcement indicated the firm’s leaders will continue to monitor market developments and might be forced to exercise even more reduction options if necessary.

The largest share of the capital spending reduction will be in the Permian Basin, where short-cycle investments can be more readily adjusted to respond to market conditions, while preserving value over the long term.

Reduced activity will affect the pace of drilling and well completions until market conditions improve. Importantly, the reductions will not compromise the scale, functional excellence and cube development advantages that are maximizing resource recovery and value in the Permian.

 

Globally, ExxonMobil anticipates industry refinery output will decline in line with demand and available storage, and it will maintain the ability to return to normal operations as demand recovers. Timing of expansion plans for select downstream and chemical facilities across the company’s portfolio will be adjusted to capture efficiencies, slow spending pace and better align with a return in commodity demand.

Despite the reductions, ExxonMobil expects to meet its projected investment of $20 billion on U.S. Gulf Coast manufacturing facilities made in its 2017 Growing the Gulf initiative. The company also expects to reach its proposed U.S. investment of $50 billion over five years announced in 2018.

“While COVID-19 has had a significant impact on the global economy, we are confident that trade, transportation and manufacturing will recover,” said Woods.

The company is maximizing production of products critical to the global response, including isopropyl alcohol, which is used to manufacture hand sanitizer, and polypropylene, which is used to make protective masks, gowns and wipes. ExxonMobil is also supporting efforts to redesign and accelerate production of reusable face masks and shields to help alleviate the shortage for medical workers and first responders.

Click here to read announcement.

Source: Business Wire

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