ExxonMobil announced Tuesday that it is reducing its 2020 capital spending by 30% and its cash operating expenses by 15% after the COVID-19 pandemic caused low commodity prices to stem from oversupply and weaker demands.
The company’s deliberate actions to increase efficiencies while reducing costs has driven the drop in cash operating expenses. This includes expected lower energy costs, according to an ExxonMobil report.
“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,” ExxonMobil CEO and Chairman Darren Woods said.
The long-term fundamentals that support ExxonMobil’s business plans have not changed, Woods said.
The largest capital spending reduction will be in the Permian Basin, where reduced activity will affect drilling paces and well completions. The Permian Basin is an area where short-circle investments can readily be adjusted to respond to market conditions, according to the company.
Current operations on the Liza Destiny production vessel are unaffected, and the company plans to start a second phase of field development in 2020 after the Liza Unity production vessel undergoes construction. The government must approve a third production vessel for the Payara development for further operations to ensue, and some 2020 activities may be postponed six to 12 months.
A final investment decision has been delayed for the Rovuma liquefied natural gas project in Mozambique, but the Coral liquefied natural gas project will continue as planned.
The company indicated that industry refinery output will likely decrease globally due to drops in demand and storage.
ExxonMobil has maximized its production of products used in sanitary items, including products used to create hand sanitizer and protective masks and gowns, according to the report.