Exxon Mobil on Tuesday announced it will cut its capital spending by 30 percent this year as the coronavirus pandemic saps energy demand and oil prices tumble.
Global oil companies have pulled back 2020 spending plans by an average of 22 percent as countries limit air travel, order businesses closed and tell residents to stay home to combat the pandemic that has killed more than 76,000 worldwide, Reuters reported.
Crude prices have sunk nearly 60 percent this year on lower demand for fuel spurred by the pandemic-driven economic hit and an oil price war.
“We haven’t seen anything like what we’re experiencing today,” Exxon Chief Executive Darren Woods said on Tuesday as he detailed spending cuts on a conference call.
Exxon was the last of the oil majors to move, and its spending cut was deeper than those of most rivals.
Exxon, the largest U.S. oil producer, set 2020 capital expenditure at $23 billion, down $10 billion from its earlier plan and the lowest in four years. Spending could drop even further and continue into next year if required, Woods said.
Exxon’s cuts will weigh the heaviest on U.S. shale, where it had plunked down $6 billion in 2017 for drilling leases and boosted output in a drive to pump around 360,000 barrels per day (bpd) this year.
Its output there this year will be around 15,000 bpd lower than planned and up to 150,000 bpd lower next year, Woods said.
Exxon did not detail its Permian spending cuts, where it recently had 58 drilling rigs at work. RBC Capital Markets analyst Biraj Borkhataria estimated it was spending up to $6 billion a year in the Permian, “and we see no reason why capex and the rig count cannot be reduced by 50 percent at a minimum in 2020.”
Exxon expects world oil demand to tumble by 25 percent to 30 percent in the short term, Woods said.
“Storage is becoming very tight. Logistics are becoming tight,” Woods said, forecasting widespread oil-well “shut-ins across the industry.”
It delayed an investment decision to build a liquefied natural gas (LNG) project in Mozambique and some spending in offshore Guyana, where it has made one of the world’s largest oil discoveries in years. Current operations in Guyana are not affected, it said.
First-quarter results, due out May 1, will be hurt by an earnings drop of about $1.4 billion in oil and gas, and about $800 million in refining, both compared with the fourth quarter, the company said. Chemical earnings will swing to a profit of about $100 million, according to figures released on Tuesday.
Exxon’s 30 percent cut in spending exceeds that of oil majors’ BP, Chevron, Royal Dutch Shell and Saudi Aramco, which have made 20 percent-25 percent reductions. BP and Chevron also cut deeply into their shale oil businesses.
The nine major oil companies have slashed a combined $38 billion, or 22 percent, from their initial 2020 spending plans for $175 billion. Overall, oil companies have cut $54 billion in planned project investments.