CVX Chevron Corporation

By Christopher M. Matthews 

Chevron Corp. said it would cut its annual capital spending budget by 26% next year and sharply through the middle of the decade, as the coronavirus pandemic forces an industrywide reappraisal of fossil-fuel investment.

Chevron said it would spend $14 billion in 2021 and between $14 billion and $16 billion a year through 2025. It previously said it would spend $19 billion to $22 billion a year through 2024 before the pandemic, while returning as much as $80 billion to shareholders over that period.

In October, Chevron told investors it would spend around $14 billion in 2021 and indicated its long-term budget could be reduced as well.

The reductions by the U.S. oil giant follow those announced this week by rival Exxon Mobil Corp., which on Monday said it was reducing its yearly capital spending by about $5 billion to $10 billion each year through 2025. Exxon, which has lost more than $2.3 billion over the first three quarters of this year, also said it would slash the book value of its assets by up to $20 billion.

Chevron has lost nearly $5 billion this year, but unlike Exxon has managed to avoid taking on large amounts of new debt due to a relatively strong balance sheet. The company's share price is down about 5% over the last six months and closed at $89.87 Wednesday.

"Chevron remains committed to capital discipline with a 2021 capital budget and longer-term capital outlook that are well below our prior guidance," Chevron Chief Executive Michael Wirth said.

Covid-19 has gutted demand for oil and gas as automobile and plane travel declined sharply amid global lockdowns and other measures to contain the virus. Chevron has let its production slide due to the weakened demand, choosing to give priority to directing its cash flow to dividend payments. It reiterated Thursday its commitment to its dividend.

Even before the pandemic, the fossil-fuel industry was contending with an oversupply of oil and gas unleashed by U.S. frackers, increased competition from renewable-energy sources and electric vehicles, and the prospect of increased climate-change regulation around the world.

Since the end of last year, Chevron has been implementing a year-long restructuring of its operations in response to an anticipated period of prolonged low commodity prices. It is in the process of cutting up to 15% of its 45,000-person staff.

In July, Chevron agreed to acquire Noble Energy Inc. for about $5 billion, one of the larger energy deals this year. Chevron didn't say Thursday how much of its capital spending would be directed to Noble's assets. It previously said it expects about $300 million in annual cost savings from integrating Noble.

Chevron said it would increase investments in its stronger assets, including offshore drilling in the Gulf of Mexico and in U.S. shale, including in the Permian Basin in New Mexico and Texas. It also said it would invest $300 million in projects related to transition to a lower-carbon-energy economy.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

December 03, 2020 10:14 ET (15:14 GMT)

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