ExxonMobil shaves $10 billion off its capital investment for 2020

Oil major ExxonMobil is reducing its 2020 capital spending by 30 percent and lowering cash operating expenses by 15 percent in response to low commodity prices resulting from oversupply and demand weakness from the COVID-19 pandemic.

Capital investments for 2020 are now expected to be about $23 billion, down from the previously announced $33 billion, the company said on Tuesday. The 15 percent decrease in cash operating expenses is driven by deliberate actions to increase efficiencies and reduce costs, and includes expected lower energy costs.

“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.

“The long-term fundamentals that underpin the company’s business plans have not changed — population and energy demand will grow, and the economy will rebound. Our capital allocation priorities also remain unchanged.”

ExxonMobil said it continues to monitor market developments and can exercise additional reduction options if required. As market conditions evolve, the company will continue evaluating the impacts of decreased demand on its 2020 production levels as well as longer-term production impacts.

The largest share of the 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 affect the pace of drilling and well completions until market conditions improve.

ExxonMobil said that developing the numerous world-class deepwater discoveries offshore Guyana remains an integral part of its long-term growth plans.

Current operations onboard the Liza Destiny production vessel 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.

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.

According to the company, a final investment decision for the Rovuma liquefied natural gas (LNG) project in Mozambique, expected later this year, has been delayed.

ExxonMobil stated it continues to actively work with its partners and the government to optimize development plans by improving synergies and exploring opportunities related to the current lower-cost environment.

The Coral LNG development continues as planned.

Despite the reductions, ExxonMobil expects to meet its projected investment of $20 billion on U.S. Gulf Coast manufacturing facilities made in its 2017 Growing the Gulf initiative. The company also expects to reach its proposed U.S. investment of $50 billion over five years announced in 2018.

“While COVID-19 has had a significant impact on the global economy, we are confident that trade, transportation and manufacturing will recover,” said Woods.

To minimize risks presented by COVID-19 and maintain operations, ExxonMobil has implemented enhanced cleaning procedures and modified work practices at sites around the world.

Woods said: “On our offshore platforms, in our refineries, at our lubes and chemical plants and throughout our facilities worldwide, our people are getting the job done and meeting the world’s needs for our products while protecting themselves and others. I commend our organization for their continued focus during these difficult circumstances.”