ExxonMobil Monday stated it’ll make “significant” reductions to spending in the face of the unprecedented drop in oil prices due to the global coronavirus epidemic, which sent its shares to a 17-year low.
It was a shocking reversal for the largest U.S. oil producer, which two weeks ago promised to “lean in” to the market drop and maintain outlays in a belief oil demand would grow in the long run.
Other leading oil corporations have cut costs amid plunging demand and newly unbridled production by prime producers Saudi Arabia and Russia. U.S. shale corporations have defined plans to reduce expenses by 25% to 30% to deal with this year’s massive plummet in oil prices and demand.
U.S. crude futures Monday settled under $29 a barrel, down from $61 at the start of the year. The slide has cut new drilling and pushed producers to seek price cuts from suppliers. Weaker demand and rising supply could result in a 6 million barrel per day glut by April, further pressuring prices.
Exxon shares slumped Monday to $34.49, a level last hit back in 2003 and sent its dividend yield to a record 10.1%.
The group earlier valued between $30 billion and $33 billion for projects this year, sharply up from the $23 billion it spent earlier in 2017 during Woods’ first year as CEO.
Exxon may cut 10% to 12% from its outlays and reduce this year’s capital spending to between $28 billion and $29 billion, stated Matt Murphy, an analyst at Tudor, Pickering, Holt.