ExxonMobil said Tuesday it will slash capital spending this year by 30% — the largest cut any oil major has made in response to the coronavirus-driven crash in demand.
More than 50 oil and gas companies so far have announced plans to reduce spending by more than $37 billion, with majors’ BP, Chevron, Royal Dutch Shell, and Saudi Aramco making 20% to 25% reductions.
Exxon’s plan calls for a 2020 capital budget of $23 billion, down 30% from the $33 billion it had previously expected. The biggest cut will come in the largest U.S. oil field, the Permian Basin in West Texas and New Mexico, where, according to RBC Capital Markets analyst Biraj Borkhataria, Exxon was spending $5 billion to $6 billion a year.
The largest U.S. oil producer will also cut operating expenses by 15%.
“After a thorough evaluation of the impacts of the pandemic and market conditions, we have worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximize cost efficiency, and put us in the strongest position when market conditions improve,” CEO Darren Woods said in a news release.
Exxon’s share price rose 3.6% to $41.92 in trading Tuesday but the stock has shed more than 38% this year.
As Reuters reports, oil companies are reversing 2020 spending and production increases by an average of 20% as “countries limit air travel, order businesses to close, and tell residents to stay home to curb the spread of the virus. In a one-two punch to suppliers, crude prices have sunk nearly 60% this year and demand for fuels is falling sharply.”
Global capital spending in the industry is expected to drop by up to $100 billion this year, according to Norwegian energy research firm Rystad Energy.
“We have additional options to further reduce spending if necessary,” Woods told CNBC. “I think with the uncertainty we want to keep those options available to us, and as we move through the next month or so we’ll keep a very close eye on the market and continue to adjust if we feel the need to.”