ExxonMobil Cuts $10B from 2020 Capex

Low commodity prices stemming from the oversupply and sagging demand tied to the COVID-19 pandemic have prompted Exxon Mobil Corp. to cut its 2020 capital spending by 30 percent and cash operating expenses by 15 percent, the supermajor reported Tuesday.

ExxonMobil’s approximately $10 billion reduction in capital spending translates into a revised 2020 capex investment plan totaling $23 billion, the firm revealed in a written statement. The company did not specify a dollar value regarding the cash operating expense cuts.

“We are not providing that level of detail,” an ExxonMobil spokesperson told Rigzone regarding the opex reduction.

ExxonMobil did, however, state that the 15-percent decrease stems from “actions to increase efficiencies and reduce costs.” Moreover, it noted that it expects lower energy costs to contribute to the 15-percent cash opex decrease.

“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,” commented ExxonMobil Chairman and CEO Darren Woods.

Woods also remarked that ExxonMobil’s business plan continues to hinge on the same long-term drivers: growing population and energy demand and a rebounding economy.

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

ExxonMobil stated that it will assign the largest share of its capex cuts to the Permian Basin, with short-cycle investments that can be readily adjusted based on market conditions. The company pointed out that reduced activity will influence the pace of drilling and well completions until market conditions improve.

“Importantly, the reductions will not compromise the scale, functional excellence and cube development advantages that are maximizing resource recovery and value in the Permian,” the company reported.

The supermajor also stated that a major component of its long-term growth plans will continue to be developing the world-class deepwater discoveries offshore Guyana.

“Current operations onboard the Liza Destiny production vessels are unaffected, and startup of the second phase of field development remains on target for 2022, with the Liza Unity production vessel currently under construction,” ExxonMobil noted. “As the company waits for government approval to proceed with a third production vessel for the Payara development, some 2020 activities are now being deferred, creating a potential delay in production startup of six to 12 months.”

Other capex-related decisions the company announced Tuesday include:

• Delaying a final investment decision for the Rovuma liquefied natural gas (LNG) project in Mozambique, which had initially been projected for later this year but proceeding as planned with another development in the Southeast African country: Coral LNG
• Adjusting the timing of expansion plans for certain downstream and chemical facilities worldwide to “capture efficiencies, slow spending pace and better align with a return in commodity demand”
• Still meeting the $20 billion investment on U.S. Gulf Coast manufacturing facilities that it targeted in 2017 via its “Growing the Gulf” initiative and retaining its expectation from 2018 of investing $50 billion in the U.S. over five years.

“While COVID-19 has had a significant impact on the global economy, we are confident that trade, transportation and manufacturing will recover,” Woods stated. “ExxonMobil continues to invest in the projects that will position us to support economic recovery and capture value for our shareholders.”

To contact the author, email mveazey@rigzone.com.