Chevron Corp on Friday slashed its capital spending plans by another $2 billion as the coronavirus pandemic guts demand for oil and gas, while delivering a year-over-year 38% increase in profits.
Global fuel demand has crashed by a third while many people shelter at home for an indefinite period. Major oil companies have largely reported losses as an oil glut and a shortage of storage space sends prices to historic lows.
Earnings at Chevron beat Wall Street expectations and were $3.6 billion in the first quarter, up from $2.6 billion during the same period last year and boosted by $1.6 billion in asset sales in the Philippines and Azerbaijan.
The second-largest oil producer in the United States cut its spending budget to $14 billion, down from the $20 billion it had planned before the oil price crash. It initially cut $4 billion, but its 30% total planned spending cut now matches that of U.S. rival Exxon Mobil Corp.
The cuts are "across the board," but include additional trims to shale projects and deferred spending in Kazakhstan, said Chief Financial Officer Pierre Breber in an interview. The company does not share its price forecast but is prepared for "lower for longer" prices of $30 per barrel internationally for two years, he said.
"We will come out of this crisis, but we will come out with inventories pretty full because there's so much oil and products in storage," Breber said.
Lower profits in its U.S. exploration and production business were offset by higher earnings in its international business.
Chevron held its dividend steady, while Royal Dutch Shell on Thursday cut its dividend for the first time since World War Two. Equinor last week also cut its dividend, while BP Plc and Exxon kept their dividends stable.
The company covered its dividend and capital spending with cash and "is in a strong position weather the storm," said Anish Kapadia of Palissy Advisors.
Oil and gas output rose to 3.24 million barrels per day (bpd), an increase of more than 6%. But the company plans to curtail its oil output by as much as 300,000 bpd in May and as many as 400,000 bpd in June, Breber said.
Shares were down a fraction at $91.46 in premarket trading.
Chevron and Exxon had been racing prior to the coronavirus crisis to each reach 1 million barrels per day of production in the Permian basin, but both have slashed spending there.
Chevron has sidelined 10 drilling rigs since early March and Exxon has cut 11 in the field since, according to data from research firm Enverus.
Chevron now expects to pump about 125,000 fewer barrels of oil and gas per day in the Permian by the end of this year, down 20% from earlier plans. It had expected output to exceed 600,000 barrels per day.
(Reporting by Jennifer Hiller and Shariq Khan; Editing by Arun Koyyur and Steve Orlofsky)