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Further Cuts Announced Due to Low Oil Price, Supply/Demand Imbalance

ExxonMobil and Halliburton are among companies announcing further cuts in spending and personnel in response to continued low commodity prices as a result of supply/demand imbalance from the COVID-19 pandemic. ExxonMobil said it is reducing its 2020 capital spending by 30% and lowering cash operating expenses by 15%, while Halliburton announced job cuts in Oklahoma and salary reductions for its executives.

ExxonMobil’s capital investments for 2020 are now expected to be approximately $23 billion, down from the previously announced $33 billion. The company said the 15% decrease in cash operating expenses is driven by deliberate actions to increase efficiencies and reduce costs and includes expected lower energy costs.

The largest share of capital spending reduction will be in the Permian Basin, where short-cycle investments can be more readily adjusted to respond to market conditions while preserving value over the long term. Reduced activity will slow the pace of drilling and well completions until market conditions improve. The company emphasized that the reductions will not compromise the scale, functional excellence, and cube development advantages that it said are maximizing resource recovery and value in the Permian.

ExxonMobil also reconfirmed that developing the numerous deepwater discoveries offshore Guyana remains an integral part of its long-term growth plans. Current operations onboard the Liza Destiny production vessel are unaffected, the company said, and startup of the second phase of field development remains on target for 2022, with the Liza Unity production vessel currently under construction. However, some 2020 activities are now being deferred as the company waits for government approval to proceed with a third production vessel for the Payara development, creating a potential delay in production startup of 6 to 12 months.

A final investment decision for the Rovuma liquefied natural gas (LNG) project in Mozambique, expected later this year, has been delayed. The Coral LNG development continues as planned.

“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,” said Darren Woods, chairman and chief executive officer of Exxon Mobil Corporation.

“Our capital allocation priorities remain unchanged,” Woods continued. “Our objective is to continue investing in industry-advantaged projects to create value, preserve cash for the dividend, and make appropriate and prudent use of our balance sheet.”

Personnel Cuts and Furloughs for Halliburton

After announcing plans to furlough approximately 3,500 employees at its Houston headquarters for the next 2 months, Halliburton said on 6 April it was cutting approximately 350 employees in Oklahoma, and that its executives would reduce their salaries.

Employees at the company's Houston headquarters will work alternate weeks during the 60 days, the company said. Employees won't be paid for the week off but will receive benefits such as health insurance.

Staff cuts at Halliburton’s Duncan, Oklahoma, facility could begin immediately and will be permanent. The facility is expected to remain open.

In addition to the salary reductions for executives, Halliburton said it will suspend certain contributions it normally makes to employee retirement accounts.

“This was a difficult decision, but it is a necessary action as we face challenging market conditions,” spokeswoman Emily Mir said in an email.

As of the end of 2019, Halliburton had about 55,000 global employees.

Further Cuts Announced Due to Low Oil Price, Supply/Demand Imbalance

Judy Feder

07 April 2020

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