Exxon Mobil announced its decision to cut capital spending by 30% for 2020, down to $23 billion from an original target of $33 billion to weather low commodity prices, oversupply and market weakness triggered by COVID-19 pandemic.
To increase efficiency, reduce costs, and taking into account expected lower energy costs, the company will reduce its cash operating expenses by 15%, the company's statement said on Tuesday.
"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," Darren Woods, chairman and CEO of Exxon Mobil Corporation, was quoted as saying in the statement.
There has been no change in the company's long-term principles, Woods insisted. "Our capital allocation priorities also remain unchanged."
Vowing to continue watching industry trends and pursue additional mitigation options if necessary, the company said it would begin to assess the impacts of reduced demand on its output rates in 2020 as well as the impacts of longer-term growth as market dynamics change.
The biggest share of the decrease in capital spending will be in the Permian Basin in Texas with a reduction in the pace of drilling and well completions, the statement added.
It said deep-water finds offshore Guyana would remain an important part of the company's long-term development strategy while the investment decision for the Rovuma liquefied natural gas (LNG) project in Mozambique that was expected later this year would be delayed.
With expectations of a global decline in industry refinery output in line with demand and available storage, the company said it would maintain the ability to return to normal operations as demand recovers.
Despite the reductions, ExxonMobil said it expects to meet its projected investment of $20 billion in the U.S. Gulf Coast manufacturing facilities made in its 2017 plan.
The company also expects to reach its proposed U.S. investment of $50 billion announced in 2018 over five years.
Furthermore, the company said as part of the fight against the global pandemic, it is maximizing production of products including isopropyl alcohol, which is used to manufacture hand sanitizer, and polypropylene, which is used to make protective masks, gowns and wipes.
"ExxonMobil is also supporting efforts to redesign and accelerate production of reusable face masks and shields to help alleviate the shortage for medical workers and first responders," the statement read.
By Sibel Morrow