ExxonMobil is slashing this year’s capital spending plans by $10bn and will cut cash operating expenses by 15 per cent as it seeks to preserve its dividend in the face of the crude price collapse sparked by coronavirus.
Capital investment this year will be $23bn, down from the previously announced $33bn. The biggest cuts will be in the Permian Basin, the heart of the US shale boom, where Exxon’s drilling will slow — the second time in two months that the company has lowered its output projections for the area.
“We haven’t seen anything like what we are experiencing today,” said chief executive Darren Woods on Tuesday. He added that Exxon was anticipating a 20-30 per cent short-term drop in global oil demand.
Exxon said it could also reduce its planned spending next year as it navigated the downturn.
“We have the capacity to do more if we need to,” said Mr Woods. “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.”
Mr Woods, who on Friday attended a meeting of oil industry chief executives with President Donald Trump at the White House, did not endorse calls from some producers to impose tariffs on Russia and Saudi Arabia to compel them to end their price war.
“Our position has always been that free markets for our industry work best,” he said. “It allows the free flow of product, it also ensures that the most efficient producers continue to produce.”
The Financial Times reported on Saturday that US and Canadian officials had held discussions about imposing tariffs on foreign oil supplies to North America.
Production from Permian shale this year would fall by about 15,000 barrels of oil equivalent a day, said Mr Woods. Previously, Exxon said output would come in at about 360,000 b/d. In 2021 output is projected to be 100,000 to 150,000 b/d lower than the target of 600,000 b/d.
“The reductions we are making in the Permian will not compromise the scale or functional excellence” of the company’s operations there, said Mr Woods.
He added that, as storage facilities and pipelines filled globally, producers would be forced to shut down more production, potentially adding to output losses beyond those associated with the reduction in planned capex.
Exxon said development of deepwater discoveries off the coast of Guyana remained “integral” to its long-term growth plans. Start-up of the 220,000 b/d second phase of the Liza project remained on course for 2022. The Payara development, expected to produce a similar amount, could be delayed by up to 12 months after its planned 2023 start-up.
Mr Woods said the company had also postponed a decision on whether to proceed with a large liquefied natural gas project in Mozambique and delayed some chemical and refining expansions.
