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Tue, 7th Apr 2020 15:03:00 |
Supermajor Slashes Spending As Oil Prices Collapse |
"We haven't seen anything like what we're experiencing today."
ExxonMobil's CEO Darren Woods said his company is expecting oil demand to decline by 20 to 30 percent because of the global pandemic and economic downturn. In response, Woods announced that the oil major could cut spending by 30 percent this year, with much of the pullback concentrated on its Permian operations. Exxon had held out longer than its rivals, waiting a month after the collapse in prices to revise down its spending program.
Woods did not reveal how much Exxon would spend in the Permian this year, but RBC Capital Markets analyst Biraj Borkhataria estimates that the company is likely spending around $6 billion, "and we see no reason why capex and the rig count cannot be reduced by 50% at a minimum in 2020," according to Reuters.
The spending reductions could translate into Exxon's Permian production coming in 15,000 bpd below its target of 360,000 bpd in 2020. Next year, the impact will be more pronounced, with cuts translating into 150,000 bpd lower than the 600,000-bpd target. "The reductions we are making in the Permian will not compromise the scale or functional excellence" of Exxon's operations, Woods said.
Exxon now plans on spending $23 billion in 2020, down from a previously expected $33 billion. The move comes after the oil major suffered credit downgrades and scrutiny over its dividend program.
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