Exxon Cuts Capital Spending by 30% in Response to Coronarivus
07 Avril 2020 - 2:10PM
Dow Jones News
By Christopher M. Matthews
Exxon Mobil Corp. said Tuesday that it would cut its 2020
capital spending by 30% as global demand for oil is sapped by the
coronavirus.
The largest portion of the $10 billion in cuts will be in the
Permian Basin, the largest U.S. oil field, in Texas and New Mexico.
Exxon said it would evaluate how the cuts would affect
production.
"We haven't seen anything like we are facing today," Chief
Executive Darren Woods said on a call with reporters Tuesday
morning.
With the announcement, Exxon became the latest major oil firm to
significantly reduce its budget in response to a crash in oil
prices caused in large part by the response to the virus. Rival
Chevron Corp. said last month it would cut its spending by $4
billion, or 20%. Large, international oil companies and U.S. shale
producers have collectively slashed budgets by tens of billions of
dollars.
Exxon's move comes ahead of a virtual meeting set for Thursday
by the Organization of the Petroleum Exporting Countries with other
oil-producing nations including Canada and Russia to discuss an
agreement to cut oil production. But Russian and Saudi Arabian
officials have said any truce in their fight for market share,
which has also helped crater oil prices over the past month, must
be accompanied by a production cut in the U.S.
Exxon, Chevron and other large U.S. oil companies are adamantly
opposed to mandated production cuts, believing that a free market
should sort things out. Many U.S. shale wells aren't economic at
current prices, and producers will ultimately be forced to shut-in
some wells.
But even globally coordinated production cuts would likely be
insufficient to stem the rapidly building oil glut as the new
coronavirus batters oil demand. Rystad Energy estimates global
demand may shrink by 25 million barrels a day, meaning that even
the 10 to 15 million barrels in cuts proposed by some Saudi and
Russian officials wouldn't be enough.
Even with the cuts, Exxon will have trouble covering its
dividend and capital expenses in 2020 without taking on debt or
selling off assets. It sold $8.5 billion in bonds in March, using a
window of opportunity to convert short-term debt into long-term
debt at low rates. S&P Global Ratings downgraded the company's
credit rating and unsecured debt in March.
(END) Dow Jones Newswires
April 07, 2020 07:55 ET (11:55 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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