Last but not least: Exxon chops spending by 30%

HOUSTON (Reuters) – Exxon Mobil Corp (XOM.N) on Tuesday throttled back a multi-year investment spree in shale, LNG and deep water oil production and will cut planned capital spending this year by 30% as the coronavirus pandemic saps energy demand and oil prices.

Oil companies are reversing 2020 spending and production increases by an average of 20% as countries limit air travel, order businesses to close and tell residents to stay home to curb the spread of the virus. In a one-two punch to suppliers, crude prices are down nearly 60% this year and demand for fuels is falling sharply.

“We haven’t seen anything like what we’re experiencing today,” Chief Executive Darren Woods said on a media call on Tuesday.

The largest U.S. oil producer, which last month pledged “significant” cuts to spending, set 2020 capital expenditure at $23 billion and could go lower if required, it said.

Exxon previously expected to spend up to $33 billion and had spent $26 billion last year.

The company had expected spending of $30 billion to $35 billion for the next several years, but 2021 spending could come down as well, Woods said.

Exxon will quickly lower spending in U.S. shale, where it plunked down $6 billion in 2017 for drilling leases in the Permian Basin and where it has run 58 drilling rigs.

“Storage is becoming very tight. Logistics are becoming tight. I think we’ll see around the world as logistics get constrained, there will be shut-ins across the industry,” Woods said, adding it was “very difficult to predict what those will look like.”

Exxon’s 30% cut in spending exceeds those of oil majors’ BP PLC, Chevron Corp, Royal Dutch Shell PLC and Saudi Aramco, which have made 20%-25% reductions. BP and Chevron also cut deeply into their shale oil businesses.

The U.S. oil major’s shares were up about 5% in premarket trading.

Exxon’s market value has fallen 42% this year as the oil-price war between Saudi Arabia and Russia has taken a toll on the energy sector. However, its stock has been a laggard for years, dropping 54% over the last five years compared with an 18% gain in the benchmark U.S. S&P 500 stock index.

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