Chevron and Phillips 66 latest to make coronavirus spending cuts

Matthew Farmer 24 March 2020 (Last Updated March 24th, 2020 18:03)

Two US oil and gas giants, Chevron and Phiullips 66, have joined others in announcing coronavirus spending cuts.

Chevron and Phillips 66 latest to make coronavirus spending cuts
Chevron will make cuts to spending on the Permian basin due to coronavirus.

Two US oil and gas giants, Chevron and Phillips 66, have joined others in announcing coronavirus spending cuts.

Chevron has announced it will cut one-fifth of its capital expenditure (capex), a sum of $4bn. Of this, half will be cut from “upstream unconventionals, primarily in the Permian Basin”.

The Permian Basin lies on the border between Texas and New Mexico, US; Chevron says it is the largest net acreage leaseholder there. The company has revised its annual production estimates for the area down by one-fifth.

The remaining $2bn of cuts take $800m from petrochemical and downstream business, $700m from exploration, and $500m from its upstream base business.

Chevron says it expects production to be flat compared to 2019 and aims to reduce operating costs by $1m as previously planned.

Phillips 66 announced its coronavirus spending cuts a few minutes after Chevron. It will reduce spending by $700m to $3.1bn across the year. It plans to cut $500m from operating costs and has taken a one-year $1bn loan for greater flexibility.

The Red Oak Pipeline and Sweeny Frac 4 projects are under construction but Phillips 66 says it will defer them. The company was due to make a final investment decision on the ACE Pipeline, though this has also been deferred. It is currently working with partners on the Liberty Pipeline, which it has also deferred.

In line with announcements by other energy companies yesterday, Chevron and Phillips 66 said planned share buybacks would not continue. Chevron spent $1.25bn repurchasing shares so far in 2020 but will now stop. Phillips will do the same, having spent $440m during the first quarter of 2020.