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ExxonMobil, Chevron Slash Permian Spending

US oil producers ExxonMobil and Chevron announced they are tightening output, for combined global shut-ins of 800,000 B/D, in response to plunging crude prices and shrinking fuel demand.

Both companies are making deep cuts in the Permian, each with global shut-ins of up to 400,000 B/D this quarter.

With the decline in oil demand, more than half of the US rig fleet has gone quiet; the Permian Basin of west Texas and New Mexico account for 56% of the shutdown, according to Baker Hughes Co. data.

Exxon and Chevron have been sidelining Permian drilling equipment since the market started crashing in March. Since then, US crude prices have plunged nearly 70% and hit negative territory on 20 April.

Exxon will sideline 75% of its Permian drilling rigs, keeping 15 working. Chevron is cutting 125,000 B/D from its targeted exit rate for the Permian region and idling all but five drilling rigs, according to Bloomberg as of 1 May.

“We would intend to bring activity back to the Permian when we see prices recover,” Chevron Chief Financial Officer Pierre Breber said.

Exxon posted a $610-million first-quarter loss, its first quarterly loss in 3 decades, on a nearly $3-billion inventory writedown reflecting lower margins and prices. Chevron posted a $3.6-billion profit on asset sales and improved refining results.

Both companies will slash spending budgets by 30% this year. Chevron cut its capital spending budget to $14 billion, and Exxon has set 2020 spending at $23 billion, its lowest in 4 years.

Even though their results topped Wall Street’s reduced estimates, Exxon shares fell 7% to $43.14 while Chevron dropped 2.8% to $89.44.

ExxonMobil, Chevron Slash Permian Spending

01 June 2020

Volume: 72 | Issue: 6

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