Picture: REUTERS/LOREN ELLIOT
Picture: REUTERS/LOREN ELLIOT

Bengaluru/Houston — US oil major Chevron has cut billions off its long-term capital and exploratory budget, even after a major restructuring of its operations, as it tries to ride out a collapse in oil prices and preserve its dividend.

Oil majors have written off about $80bn in asset values this year, cut output and laid off thousands of staff to save money in the face of a sharp decline in oil demand and revenue.

Chevron said it expects total capital and exploratory budget to end-2025 to be between $14bn and $16bn, well below the prior forecast of up to $22bn.

Its move to restrain spending on new oil projects, hold outlays flat in 2021 and cut about $6bn from the last forecast is a sign it expects low energy prices for years.

The reduction came despite the addition of huge projects in the US, Middle East and Africa, acquired by Chevron as part of a $4.1bn purchase of Noble Energy.

Detailing its 2021 budget of $14bn, the company said it will spend $11.5bn on exploration and production and $2.1bn on refining related operations.

Chevron’s 2021 Permian basin spending of $2bn is half what it planned at the start of 2020 and lower than 2019 levels of $3.6bn, said Biraj Borkhataria from RBC Capital Markets, adding that the company has been true to its recent message of “lower for longer capex”.

Despite the cut to the overall budget, the company said that starting from 2022 it is likely to raise investments in the Permian basin and the Gulf of Mexico, helped by an anticipated drop in capital needed for a Kazakhstan project.

In contrast with Chevron, which has been praised for its capital discipline, its US rival ExxonMobil said on Monday that by 2025 it will boost expenditure above this year’s $23bn level.

Chevron shares were up about 1% at $90.72 in early morning trade. 

Reuters

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