ExxonMobil will reduce its 2020 capital spending by 30% and cash operating expenses by 15%, the company announced.
The company originally set its 2020 capital investments at US$33 billion – they are now set to be around US$23 billion. By lowering its cash operating expenses, ExxonMobil aims to increase efficiencies and reduce costs on the basis of lower expected energy costs.
The move comes on the back of oversupply and demand weakness as the COVID-19 pandemic drives down commodity prices.
The Permian Basin will see the largest share of the capital spending reduction as its short-cycle investments can be more readily adjusted in response to market conditions while preserving long-term value.
ExxonMobil noted that current operations onboard the Liza Destiny production vessel offshore Guyana are unaffected – startup of the second phase of field development remains on target for 2022. The Liza Unity production vessel is currently under construction. However, with the company awaiting government approval to proceed with a third production vessel, to be used on the Payara development, some 2020 activities are now being deferred. This could delay production startup by six to 12 months.
The company has also delayed the final investment decision for Mozambique’s Rovuma LNG project. The Coral LNG development continues as planned.
However, ExxonMobil expects it will meet its projected investment of US$20 billion on US Gulf Coast manufacturing facilities. The company also expects to reach its proposed US$50-billion US investment over five years announced in 2018.
As part of the global response to COVID-19, the company is maximizing production of vital products such as isopropyl alcohol, which is used to make hand sanitizer, and polypropylene, which is used to make protective masks, gowns and wipes.
ExxonMobil Chairman and CEO Darren Woods said: “The long-term fundamentals that underpin the company’s business plans have not changed – population and energy demand will grow, and the economy will rebound. Our capital allocation priorities also remain unchanged. Our objective is to continue investing in industry-advantaged projects to create value, preserve cash for the dividend and make appropriate and prudent use of our balance sheet.”
ExxonMobil will monitor COVID-19’s impact on the global economy and how decreased demand will affect its 2020 production levels. The company also has additional reduction options it can exercise if required.