Chevron Joins Other E&P Majors in Cutting 2020 Spending

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chevron Corporation (NYSE:CVX) (San Ramon, California) is the latest exploration and production (E&P) company to announce capital spending cuts this year as oil and gas prices have plummeted due to decreased demand because of the COVID-19 pandemic and a Saudi Arabia-led price war. Industrial Info is tracking more than $52 billion in projects involving Chevron, including more than $12.9 billion worth in North America.

Chevron announced that it would reduce its capital and exploratory budget by $4 billion, or 20%, to $16 billion for the year. Reductions are expected to occur as follows:

• $2 billion in upstream unconventionals, primarily in the Permian Basin
• $700 million in upstream projects and exploration
• $500 million in the company's upstream base business
• $800 million in downstream and chemicals and other

In a company press release, Jay Johnson, Chevron's executive vice president of Upstream, said, "The flexibility of our capital program allows us to respond to these unexpected market conditions by deferring short-cycle investments and pacing projects not yet under construction."

Chevron did not include more detailed information regarding which projects could be affected.

Among Chevron's U.S. projects in the planning and engineering phase that have been planned to begin construction this year is the Jack/St. Malo field development in the Gulf of Mexico. Industrial Info is tracking $850 million in projects related to the development. Drilling and water injection was set to begin in third-quarter 2020, involving the completion of two production wells and three water injection wells to increase recoverable resources by 175 million barrels oil equivalent. The project also includes a subsea infrastructure installation and topsides modifications. The long-term projects were set for completion in late 2022 and 2023. Industrial Info will continue tracking the status of projects such as these. For more information, see Industrial Info's project reports on the Jack/St. Malo drilling and water injection, subsea infrastructure installation and topsides modifications.

Chevron also has a strong presence in Indonesia and Australia, where projects such as the Indonesia Deepwater Development for natural gas, which was set to kick off next year. Click here for a list of related projects.

In addition to the reduced capital spending, Chevron is pressing the pause button on its $5 billion annual share repurchase program. The company repurchased $1.75 billion of shares in the first quarter.

Chevron joins other oil and gas majors in the dash to slash capital expenditures, including Royal Dutch Shell plc (NYSE:RDS-A) (The Hague, Netherlands), Total (NYSE:TOT) (Paris, France) and Phillips 66 (NYSE:PSX) (Houston, Texas), all of whom announced spending cuts this week, as well as several other major and minor players that announced budget cuts earlier this month. Shell is cutting $5 billion from its 2020 capital expenditure budget and another $3 billion to $4 billion in operating costs. Total plans to cut $3 billion from its capital spending budget, another $800 million in operating expenses and has suspended its $2 billion share buyback program. Midstream operator Phillips 66 is reducing its 2020 capital spending by $700 million, to $3.1 billion. Projects that the company has announced will be deferred include the Red Oak grassroot crude oil pipeline in Texas, the Liberty crude oil pipeline from the Rockies and Bakken to Cushing, Oklahoma, and Fractionator 4 at the company's Sweeny Hub in Old Ocean, Texas. Behemoth E&P company Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) has said it will reduce capital spending, but has not announced an amount yet. The company previously set guidance of $33 billion in spending for this year.

Industrial Info's global research teams continue to track the projects that have been affected by the COVID-19 pandemic and have so far identified more than 725 projects with a combined value of more than $90 billion that have been impacted. Click here for a list.

Major oil and gas projects that have been affected include Shell-led LNG Canada's liquefied natural gas (LNG) production plant in Kitimat, British Columbia, and the $5 billion Vaca Muerta LNG plant in Argentina.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.