(Bloomberg) — Chevron Corp. followed arch-rival Exxon Mobil Corp. in cutting long-term capital spending, responding to this year’s slump in oil and expectations that prices won’t rebound any time soon.
Chevron’s capital and exploration budget will be $14 billion to $16 billion annually from 2022 to 2025, according to a statement Thursday, down 27% from the mid-point of its previous forecast.
The revision reflects 2020’s savage drop in crude, which has led the industry to make deep cuts to production, jobs and future investment plans. While oil has rebounded from the worst of its slump, prices remain below $50 a barrel, and the pandemic continues to weigh on global demand for petroleum.
European rivals Royal Dutch Shell Plc and BP Plc have used the crisis to accelerate their pivot toward low-carbon fuels. Although the American titans remain committed to fossil fuels, large budget reductions mean less future investment in traditional oil and natural gas. Chevron’s annual budgets for the next five years are less than half the level of 2014, when crude traded for more than $100 a barrel.
Chevron’s plan also illustrates evolving priorities. Spending at its $45 billion Tengiz oil project in Kazakhstan, which has gone massively over budget, is expected to decline, while expenditures will rise in the Permian Basin and the Gulf of Mexico. The cuts are bad news for oilfield servicers, which rely on spending by explorers for their income.
The company’s announcement comes three days after Exxon Mobil Corp. said it too will reduce in capital spending, to $25 billion a year through 2025, a $10 billion reduction from its pre-pandemic target. Exxon, which also announced the biggest writedown in the company’s modern history, is struggling to generate enough cash to maintain its dividend.
Chevron sought to distance itself from its U.S. rival. The California-based company is tied with French supermajor Total SE in requiring the lowest oil price to break even before dividends are paid, according to analysts at HSBC Holdings Plc. Chevron recently overtook Exxon as America’s biggest oil company by market value.
“Chevron is in a different place than others in our industry,” Chief Executive Officer Mike Wirth said in the statement. “We’ve maintained consistent financial priorities starting with our firm commitment to the dividend.”
Chevron reaffirmed its $14 billion capital budget for 2021. That sum includes $300 million earmarked for investments related to the energy transition.
Shares of Chevron rose 0.5% to $90.30 at 10:33 a.m. in New York.
(Updates with shares in last paragraph, context throughout.)
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