March 24, 2020 / 11:38 AM / 2 months ago

CORRECTED-UPDATE 2-Chevron cuts 2020 spending, Permian production forecasts

(Corrects year-end Permian output, adds analyst comment)

March 24 (Reuters) - Chevron Corp will slash capital spending by $4 billion this year and suspend share buybacks, the latest oil company to cut costs in the face of an unprecedented slide in oil prices.

Oil has crashed by more than 60% since January, hit by global demand destruction from the coronavirus pandemic and a price war between Saudi Arabia and Russia.

The second largest U.S. oil firm on Tuesday joined refining giant Phillips 66, which cut its 2020 spending forecast by about 18%. Chevron said it would spend $16 billion instead of a planned $20 billion this year, including halving spending in the Permian Basin, the top U.S. shale field. It now expects to pump about 125,000 fewer barrels of oil and gas per day in the Permian Basin by the end of this year, down 20% from earlier plans. It had expected output to exceed 600,000 barrels per day.

This is the first indication from an oil major of how sharply it would pull back spending in the Permian field, output from which has helped the United States become the world’s largest oil producer.

Chevron will cut $2 billion from its Permian spending, from an expected pace of about $4 billion per year.

Royal Dutch Shell on Monday said it would cut spending by $5 billion and suspend its $25 billion share buyback plan.

Exxon Mobil, the largest U.S. oil company, has not released its new spending plan but said cuts would be "significant", while Norway’s Equinor has also reduced its share buyback program.

The No. 2 Canadian crude producer Suncor Energy Inc on Monday cut its 2020 production outlook and suspended share repurchases.

Chevron's spending cuts were "much deeper than expected", RBC Capital Markets analyst Biraj Borkhataria said, adding that the suspension of share buybacks was in line with expectations.

The $5 billion annual repurchase program was halted after $1.75 billion of shares were bought back during the first quarter.

Earlier this month Chevron had promised to keep its spending in check and return up to $80 billion to shareholders over the next five years.

"Our focus is on protecting the dividend, prioritizing capital that drives long-term value, and supporting the balance sheet," said Chief Financial Officer Pierre Breber.

The cuts do not "completely close the post-dividend outspend," analysts at Tudor, Pickering, Holt & Co said, but added that Chevron is the "best positioned to weather this downturn" of the major oil companies.

Chevron shares closed on Monday at $54.22, down 8.7%, but were up 6.7% in premarket trading to $57.80. (Reporting by Jennifer Hiller in Houston, Shariq Khan in Bengaluru; Editing by Shinjini Ganguli, Kirsten Donovan and Jan Harvey)

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