Chevron, Exxon shrink spending as coronavirus cuts demand

In this news, we discuss the Chevron, Exxon shrink spending as coronavirus cuts demand.

(Reuters) – U.S. oil giants Chevron Corp and Exxon Mobil Inc aggressively cut spending in the third quarter in a race to overcome weak fuel demand trends caused by the COVID-19 pandemic, although the former has managed a low profit.

Exxon XOM.N posted its third consecutive quarter of losses and reduced spending plans for the year ahead.

Like other energy majors, the two are laying off a substantial portion of their workforce and planning to cut costs further as both attempt to reverse years of weak inventory performance, made worse by the impact of movement restrictions.

U.S. oil prices have fallen 41% this year as the coronavirus has forced billions of people into lockdowns. Demand recovered in late summer from the northern hemisphere, but countries like Germany, India and the United States are once again grappling with a surge in infections, curbing the demand for gasoline, diesel and jet fuel.

The outlook for energy use “depends on when the world – this country and other countries – takes control of the pandemic and these activities resume. We don’t know when that will take place, ”said Pierre Breber, Chief Financial Officer of Chevron.

Chevron, the second-largest U.S. oil producer by production, earned $ 201 million in the most recent quarter, compared to a profit of $ 2.9 billion for the period a year earlier. Exxon recorded a loss of $ 680 million, the third consecutive quarterly loss.

Exxon started the year with an ambitious spending plan driven by investments in shale and offshore discoveries, particularly off Guyana. It initially planned to spend $ 33 billion in capital investment and exploration in 2020; in three quarters, it spent only $ 16.6 billion.

Next year, America’s largest oil producer said capital spending will be between $ 16 billion and $ 19 billion, from an adjusted spending plan of around $ 23 billion this year.

Earlier this week, Exxon said it would cut its workforce by around 15% and keep its fourth-quarter dividend at 87 cents per share, making 2020 the first year since 1982 that it has not increased its payout to shareholders.

The company, once the most valuable in the United States by market capitalization, was overtaken this month by wind and solar energy provider NextEra.

At America’s first oil field, the Permian Basin shale field, Chevron expects production to drop to about 550,000 barrels of oil and gas per day, from 565,000 barrels per day this quarter, Breber said. It is likely to maintain this level until the global economy recovers.

Exxon’s Permian production was around 401,000 barrels per day in the third quarter and it said its costs were down 20%.

Reporting by Jennifer Hiller in Houston, Arathy Nair and Shariq Khan in Bangalore; Written by David Gaffen; edited by Barbara Lewis

Original © Thomson Reuters

Originally posted 2020-10-30 22:46:10.

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