Oil and gas supermajor Exxon Mobil Corp. cut its capital budget for 2020 by 30%, or $10 billion, in response to low energy prices caused by collapsing demand. Exxon said it would also cut its cash operating expenses by 15% to survive the downturn.
Exxon's new capital investment budget for the year is now about $23 billion, a decrease from the $33 billion previously announced, according to an April 7 news release.
The company said it plans to increase efficiency and reduce costs to lower cash operating expenses. The bulk of Exxon's planned spending cut will be in the Permian Basin, which will have an impact on the pace of drilling and well completions but not on resource recovery and value in the production area, the company said. Exxon is one of the last big oil and gas companies to announce spending cuts after the coronavirus spread gutted transportation fuel demand and Saudi Arabia and Russia started a price war. Eleven other of the biggest oil and gas companies cut nearly $34 billion from their plans.
"After a thorough evaluation of the impacts of the pandemic and market conditions, we have worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximize cost efficiency, and put us in the strongest position when market conditions improve," Exxon Chairman and CEO Darren Woods said in a statement.
Industry refinery output is expected to decline along with demand and available storage. Expansion plans for downstream and chemical facilities will be timed to pace spending and better align with commodity demand, Exxon said.
As for field development offshore Guyana, operations at the Liza Destiny production vessel remains unaffected and on target to start up the second phase in 2022, and the Liza Unity production vessel is still under construction, according to the company. Some 2020 activities will be deferred as Exxon awaits government approval for a third production vessel for the Payara development. Production start-up is expected to be delayed by six to 12 months.
Exxon also delayed its final investment decision for the Rovuma LNG project in Mozambique. The decision was previously scheduled for later this year.
Exxon said it will monitor the impacts of lower demand on production levels for the year and can make additional cuts if needed.