Chevron, Exxon shrink spending as coronavirus cuts demand

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© Reuters. FILE PHOTO: Darren Woods, Chairman & CEO of Exxon Mobil Company speaks throughout a information convention on the NYSE

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By Jennifer Hiller, Arathy S Nair and Shariq Khan

(Reuters) – U.S. oil majors Chevron Corp (N:) and Exxon Mobil Inc (N:) minimize spending aggressively within the third quarter in a race to offset weak traits in gasoline demand attributable to the COVID-19 pandemic, although the previous managed a slim revenue.

Exxon posted its third straight quarter of losses on Friday and diminished spending plans for the approaching yr.

In frequent with others within the sector, the 2 are shedding a considerable portion of their workforce and anticipate to chop prices additional as they attempt to reverse years of weak inventory efficiency, worsened by the influence of motion restrictions.

U.S. oil costs have dropped 41% this yr because the coronavirus compelled billions of individuals into lockdowns. Demand recovered within the late northern hemisphere summer season, however nations together with Germany, India and the USA are once more tackling a surge in infections, dampening demand for gasoline, diesel and jet gasoline.

The outlook for vitality consumption “depends upon when the world – this nation and different nations – get management of the pandemic and people actions resume. We do not know when that is going to be,” mentioned Chevron Chief Monetary Officer Pierre Breber.

Exxon shares have been down 1.8% to $32.39 in early buying and selling on Friday. Chevron rose 0.7%. Exxon shares have misplaced half of their worth this yr; Chevron’s are down 40%.

Chevron, the second-largest U.S. oil producer by manufacturing, earned $201 million in the latest quarter, in contrast with a revenue of $2.9 billion for the year-earlier interval. Exxon posted a lack of $680 million, its third straight quarterly loss.

Exxon got here into the yr with an formidable spending plan pushed by investments in shale and offshore discoveries, significantly off the coast of Guyana. It initially deliberate to spend $33 billion in capital and exploration funding in 2020, although by means of three quarters it has as an alternative spent simply $16.6 billion.

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Now, nevertheless, it’s targeted on preserving its dividend. Earlier this week, Exxon mentioned it might minimize its workforce by about 15% however saved its fourth-quarter dividend at 87 cents a share, making 2020 the primary yr since 1982 that it has not raised its shareholder payout.

“It’s vital that Exxon is explicitly guiding to sustaining the dividend having diminished capex and probably including extra divestments,” mentioned Anish Kapadia, director of vitality at London-based Palissy Advisors.

Exxon mentioned its North American dry gasoline property, price roughly $25 billion to $30 billion, may very well be written down if the corporate decides these holdings will not be a part of its long-term funding plans.

Subsequent yr, the most important U.S. oil producer mentioned capital spending could be between $16 billion to $19 billion, versus an adjusted plan to spend round $23 billion this yr.

The corporate, as soon as essentially the most precious in the USA by market capitalization, was this month surpassed in worth by wind and photo voltaic supplier NextEra.

Within the high U.S. oil subject, the Permian Basin shale subject, Chevron expects output to dip to round 550,000 barrels of oil and gasoline per day, from 565,000 barrels per day this quarter, Breber mentioned. It’s prone to preserve that stage till the worldwide financial system recovers.

Exxon’s Permian output was round 401,000 barrels per day within the third quarter and it mentioned its prices there had dropped 20%.