Yemisi Izuora
Chevron is cutting both its guidance for shale production from the US Permian Basin and its capital spending this year by 20 per cent in response to the oil price collapse, it said Tuesday.
Shale oil and gas output from the Permian Basin is expected to be about 125,000 barrels per day, b/d of oil equivalent, or 20 per cent below prior guidance by year-end, Chevron said in a statement.
No figure was given for its original Permian production target this year but Chevron produced 514,000 boe/d in the Permian during Q4 2019 and had been ramping up to get to 1 million barrels of oil equivalent daily boe/d in the coming years.
As a result of the cutbacks, the oil major said it now sees its overall, underlying oil and gas production roughly flat relative to 2019 when it reported average output of 3.06 million boe/d.
ExxonMobil, one of the Permian’s top producers, last week said it was preparing to “significantly” decrease its 2020 spending due to the coronavirus-triggered global recession that is devastating global oil demand.
“Given the decline in commodity prices, we are taking actions expected to preserve cash, support our balance sheet strength, lower short-term production, and preserve long-term value,” Chevron CEO Michael Wirth said in a statement.
The company said it is reducing its 2020 organic capital and exploratory spending by $4 billion, or 20 per cent to $16 billion, with half of the total primarily hitting spending in the Permian.
Spending on other upstream projects and exploration will be reduced by $1.2 billion and $800 million will cut from the downstream and chemicals division.
“We are focused on completing projects already under construction that will start up in future years while preserving our capability to increase short-cycle activity in the Permian and other areas when prices recover,” Chevron’s executive vice president of upstream Jay Johnson said.
Chevron said it has also suspended its $5 billion annual share repurchase program after repurchasing $1.75 billion of shares during the first quarter.