U.S. Chevron has announced steps it is taking to reduce costs in response to market conditions.
Chevron outlined it plans that will see it reducing its guidance for 2020 organic capital and exploratory spending by 20 per cent to $16 billion. Reductions are expected to occur across the portfolio and are estimated as follows:
- $2 billion in upstream unconventionals, primarily in the Permian Basin
- $700 million in upstream projects and exploration
- $500 million in upstream base business spread broadly across our U.S. and international assets
- $800 million in downstream & chemicals and other
“With an industry leading balance sheet and a flexible capital program, we believe Chevron is resilient and positioned to withstand this challenging environment,” said Chevron Chairman and CEO Michael Wirth. “Given the decline in commodity prices, we are taking actions expected to preserve cash, support our balance sheet strength, lower short-term production, and preserve long-term value.”
Cash capital and exploratory expenditures are expected to decrease by $3.3 billion to $10.5 billion in 2020. Total capital and exploratory spending in the second half of 2020 is expected to be about $7 billion, an annual run rate 30 per cent lower than the approved budget announced in December 2019.
“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,” said Jay Johnson, executive vice president of Upstream, “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.”
In addition to reducing capital expenditures, the company is taking other actions .
The $5 billion annual share repurchase program has been suspended after repurchasing $1.75 billion of shares during the first quarter.
The company completed the sale of its interest in the Malampaya field in the Philippines with proceeds over $500 million received in the first quarter. In April, the company expects to close the sale of its upstream interests in Azerbaijan and its interest in a related pipeline.
The company continues to execute its plans to reduce run-rate operating costs by more than $1 billion by year-end 2020.