- Chevron reduces 2020 capital spending plan by $4 billion, or 20%
- The company suspends share repurchases after buying $1.75 billion of shares in the first quarter
- Stock trades 5% higher today after hitting the 15-year last week
Chevron (NYSE:CVX) plans to cut capital spending by more than $4 billion, or 20%, due to the collapse in oil prices and the coronavirus outbreak, the company said in a press release.
“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.
The oil giant announced it will slash “organic capital and exploratory spending” by 20% to $16 billion for 2020. As much as half of these cuts will be made in “upstream unconventionals” portfolio, primarily in the Permian Basin production base.
“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,” added Wirth.
Chevron expects production output for 2020 to be roughly flat compared to the last year. In addition, the company will continue to identify costs to cut with an aim to reduce operating costs by more than $1bn by the end of the year.
“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.”
Moreover, Chevron said it will suspend the buyback program. In the first quarter, the company repurchased $1.75 billion worth of stocks, out of $5 billion planned for this year.
Chevron also said it raised $500 million from the sale of its interest in the Malampaya field in the Philippines, while the company expects to close the sale of its upstream interests in Azerbaijan in April.
Shares of Chevron are up 5% today after hitting the 15-year low last week. Since the beginning of the year, Chevron stock price has decreased by 42%.