Picture: REUTERS/JESSICA RINALDI
Picture: REUTERS/JESSICA RINALDI

Houston/Bengaluru — US oil giants Chevron and ExxonMobil cut spending aggressively in the third quarter in a race to beat weak trends in fuel demand caused by the Covid-19 pandemic, though the former managed a slim profit.

Exxon posted its third straight quarter of losses and reduced spending plans for the coming year.

In common with other energy majors, the two are laying off a substantial portion of their workforce and expect to cut costs further as both try to reverse years of weak stock performance, worsened by the impact of movement restrictions.

US oil prices have dropped 41% this year as the coronavirus forced billions of people into lockdowns. Demand recovered in the late northern hemisphere summer, but nations, including Germany, India and the US, are again tackling a surge in infections, stemming demand for petrol, diesel and jet fuel.

The outlook for energy consumption “depends on when the world — this country and other countries — get control of the pandemic and those activities resume. We don’t know when that’s going to be”, said Chevron CFO Pierre Breber.

Chevron, the second-largest US oil producer by production, earned $201m in the most recent quarter, compared with a profit of $2.9bn for the period a year earlier. Exxon posted a loss of $680m, its third straight quarterly loss.

Exxon came into the year with an ambitious spending plan driven by investments in shale and offshore discoveries, particularly off the coast of Guyana. It originally planned to spend $33bn in capital and exploration investment in 2020; for three quarters it has, instead, spent just $16.6bn.

For 2021, Exxon, the largest US oil producer, said capital spending would be between $16bn and $19bn, from an adjusted plan for spending about $23bn in 2020.

Earlier this week, Exxon said it would cut its workforce by about 15% and kept its fourth-quarter dividend flat at 87c a share, making 2020 the first year since 1982 that it has not raised its shareholder payout.

The company, once the most valuable in the US by market capitalisation, was surpassed in value this month by wind and solar provider NextEra Energy.

In the top US oil field, the Permian Basin shale field, Chevron expects output to dip to about 550,000 barrels of oil and gas per day, from 565,000 this quarter, Breber said. It is likely to maintain that level until the global economy recovers.

Exxon’s Permian output was about 401,000 barrels per day in the third quarter and it said its costs there had dropped 20%.

Reuters

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