Equinor Cuts 2020 Spend By $3 Billion over COVID-19 and Collapsing Oil Prices

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Europe's largest oil producer, Equinor (NYSE:EQNR), has joined a growing line of global oil and gas producers cutting planned investment spending in the face the COVID-19 pandemic and plummeting oil prices.

The Norwegian major plans to cut spending and costs by $3 billion this year. It joins other players such as Shell (NYSE:RDS-A), Total (NYSE:TOT), Chevron (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) among others that have cut projected 2020 spending by billions of dollars.

The three key points to the plan are:

• Reducing organic capex for 2020 from $10 billion or $11 billion to around $8.5 billion, a reduction of around 20%
• Reducing exploration activity for 2020 from around $1.4 billion to around $1 billion
Reducing operating costs for 2020 by around $700 million compared with original estimates

The cost reductions come in addition to a previously announced suspension of buy-back under the share buy-back programme, valued at $675 million, "until further notice."

"Equinor is in a strong financial position to handle market volatility and uncertainty," said president and chief executive officer of Equinor ASA, Eldar Sætre. "Our strategy remains firm, and we are now taking actions to further strengthen our resilience in this situation with the spread of the coronavirus and low commodity prices. We have implemented measures to reduce the risk of spreading the coronavirus and have so far been able to maintain production at all our fields. Safe operations remain our first priority in this situation."

Global crude oil prices dropped to their lowest yet in recent days as the virus pandemic continues alongside the continuing price war between Russia and Saudi Arabia. Brent crude hit just over $23 per barrel--the lowest price in 18 years--while the U.S. benchmark West Texas Intermediate (WTI) dropped below $20 a barrel in Asian trading. At the same time, domestic and international travel restrictions have severely cut demand for fuels.

Shell recently announced its own "decisive action" by cutting planned 2020 expenditure by $5 billion to $20 billion while setting out to reduce underlying operating costs by $3 billion to $4 billion per annum over the next 12 months compared with 2019 levels.

"As well as protecting our staff and customers in this difficult time, we are also taking immediate steps to ensure the financial strength and resilience of our business," said Ben van Beurden, chief executive officer of Royal Dutch Shell. "The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past."

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