ExxonMobil said it is reducing its 2020 capital spending by 30 per cent and lowering cash operating expenses by 15 per cent in response to low commodity prices resulting from oversupply and demand weakness from the COVID-19 pandemic.
The U.S. oil giant said that capital investments for 2020 are now expected to be about $23 billion, down from the previously announced $33 billion. The 15 per cent 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. Our capital allocation priorities also remain unchanged. Our objective is to continue investing in industry-advantaged projects to create value, preserve cash for the dividend and make appropriate and prudent use of our balance sheet.”
ExxonMobil said it continues to monitor market developments and can exercise additional reduction options if required. As market conditions evolve, the company will continue evaluating the impacts of decreased demand on its 2020 production levels as well as longer-term production impacts.
The biggest cuts will come 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
Impact on global projects
ExxonMobil gave an update on its various global projects.
Its deepwater discoveries offshore Guyana will remain an integral part of ExxonMobil’s long-term growth plans. The startup of the second phase of field development remains on target for 2022, with the Liza Unity production vessel currently under construction. As the company waits for government approval to proceed with a third production vessel for the Payara development, some 2020 activities are now being deferred, creating a potential delay in production startup of six to 12 months.
ExxonMobil noted that a final investment decision for the Rovuma liquefied natural gas (LNG) project in Mozambique, expected later this year, has now been delayed.
The 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. “ExxonMobil continues to invest in the projects that will position us to support economic recovery and capture