LONDON (Reuters) – The world’s biggest oil and gas companies are slashing spending this year following a collapse in oil prices driven by a slump in demand because of coronavirus and a price war between the top exporters Saudi Arabia and Russia.
FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. Picture taken November 22, 2019. REUTERS/Angus Mordant/File Photo
Cuts already announced by five major oil companies including Saudi Aramco (2222.SE) and Royal Dutch Shell (RDSa.L) come to a combined $25 billion, or a drop of 20% from their initial spending plans of $27 billion.
Brazilian oil company Petrobras said it was dialing back short-term production, delaying a dividend payment and trimming its 2020 investment plan, among other measures aimed at reducing costs in the face of the coronavirus pandemic.
(Graphic: Big Oil’s 2020 capex cuts, here)
Oil prices have slumped 60% since January to below $30 a barrel. Brent crude LCOc1 was or 1.7% at $26.70 per barrel on Wednesday as faltering fuel demand outweighed a massive pending U.S. economic stimulus package.
Investors also say that if the current crisis is prolonged, the spending cuts announced by major oil companies may not be enough to let them maintain dividends without adding to their already elevated levels of debt.
The combined debt of Chevron, Total (TOTF.PA), BP, Exxon Mobil and Royal Dutch Shell stood at $231 billion at the end of in 2019, just shy of the $235 billion hit in 2016 when oil prices also tumbled below $30 a barrel.
(Graphic: Big Oil’s rising debt png, here)
Reporting by Ron Bousso; Editing by Elaine Hardcastle