Chevron looking to further trim costs for exploration, production
Chevron plans to further cut spending on oil exploration and production over the next five years as the oil giant prepares for a slow recovery from the global pandemic.
The California oil major said Thursday that it will spend $14 billion on drilling and production next year. It lowered its long-term capital budget to between $14 billion and $16 billion annually through 2025, down more than a quarter from its earlier target of between $19 billion and $22 billion.
The company said it will prioritize projects that provide longterm value and deliver higher returns and lower carbon emissions. Chevron also is moving to extract savings from its $12 billion acquisition in October of the Houston oil and gas company Noble Energy.
Chevron recently said it would cut about one-fourth of Noble’s workforce, or more than 500 jobs.
“Chevron remains committed to capital discipline with a 2021 capital budget and longer-term capital outlook that are well belowour prior guidance,” Chevron CEO MichaelWirth said in a statement. “With our major restructuring behind us and Noble Energy integration on track, we’re prepared to execute this program with discipline.”
Chevron’s move comes just days after rival Exxon Mobil slashed capital spending over the next five years to its lowest level
since 2005. The Irvingbased oil giant said its capital spending won’t exceed $25 billion a year through 2025, down $10 billion from its pre-pandemic target.
Oil and gas companies are bracing for lower oil prices for longer as coronavirus cases continue to climb nationally and as nations around theworld shift away from fossil fuels amid growing concerns about climate change. The Energy Information Administration forecasts crude prices will average $43 per barrel in the first half of 2021, up from $40 a barrel during the second half of 2020.
The agency does not expect global petroleum demand to recover to pre-pandemic levels of 101.5 million barrels per day in 2019 until 2022 at the earliest.
As a result, U.S. oil and gas companies have slashed spending and delayed projects. Drilling and completions budgets by U.S. shale companies are on track to fall by more than half this year to $45.2 billion, down from $98.7 billion in 2019, according to Rystad, a Norwegian energy research company.
Chevron is pulling capital from its Kazakhstan project but said it will increase investment in the Permian Basin of West Texas as well as the Gulf of Mexico. It plans to spend about $2 billion in the Permian, about 40 percent of its U.S. exploration and production budget.
Oil and gas companies are also laying off thousands of workers as they settle into this new “lower for longer” reality. Chevron is cutting as many as 6,000 employees, or 15 percent of its 45,000 non-gas station workforce this year. In October, Chevron laid off 700 workers in downtown Houston.
Exxon in late October said it plans to cut 14,000 jobs globally, including 1,900 U.S. employees, primarily in the Houston area, in response to the coronavirus-driven downturn. The company employs about 12,000 in the Houston area.