Chevron plans to slash budget in next two years
The company plans to spend between $17bn to $22bn annually in 2017 and 2018
American oil and natural gas producer Chevron Corp on Tuesday said it will slash its budget by at least 17% for the next two years to save cash due to the low crude oil prices.
The outlook from one of the world's largest oil companies highlights the unease permeating the energy industry as executives try to contend with what many are forecasting to be crude prices below $50 per barrel through at least the end of the decade.
For 2016, Chevron has already announced it would spend $26.6bn. The company plans to spend between $17bn to $22bn annually in 2017 and 2018.
"Industry conditions are tough right now, with low oil and natural gas prices," Chevron chief executive officer John Watson said in a statement ahead of the company's annual investor day in New York.
"We believe markets will improve, and we'll be well positioned when they do," Watson said.
Part of the spending reduction will come as construction projects are finished around the world, including major liquefied natural gas (LNG) projects in Australia and Angola, as well as oil projects in the US Gulf of Mexico.
On Monday night, Chevron said it had started producing LNG at its Gorgon facility in Western Australia and would begin shipping next week, a major milestone for a long-delayed and over-budget project.
Chevron executives reiterated the company's commitment to pay its $1.07 quarterly dividend, adding they plan to limit debt increases beyond this year.
Chevron had already slashed its budget for this year by more than 24%, but the move on Tuesday signalled more cuts would be needed, especially to protect the dividend, which executives have called their top priority.
Chevron is paying its dividend partially with debt. While executives had outlined a plan last fall to cover the dividend with cash flow by next year, that plan requires oil prices at $50 per barrel.