Chevron Slashes Capex Again To Protect Dividend In Oil Price Rout

U.S. oil supermajor Chevron Corporation (NYSE: CVX) reduced its capex guidance for the second time in two months to protect its dividend, as it warned on Friday that its financial results would continue to be depressed as long as oil prices stay low. 
 
Chevron said in its Q1 earnings report today that it is further reducing its 2020 capital expenditure (capex) guidance by up to $2 billion to $14 billion.
 
In March, Chevron had already slashed capital expenditures, especially in the Permian, and said it was suspending its share buyback program. Chevron announced in March a cut to its 2020 capital spending plan by $4 billion, or by 20 percent, to $16 billion, to protect its dividend and balance sheet in one of the worst oil price routs in recent memory. Of the $4-billion initial capex cut, Chevron will slash $2 billion across upstream unconventionals, primarily in the Permian Basin.
 
On the Q1 earnings front, Chevron reported on Friday sales and other operating revenues at $30 billion, down from $34 billion for Q1 2019.
 
Earnings rose to $3.6 billion, from $2.6 billion for Q1 last year, but this past quarter’s earnings were favorably impacted by a gain of $240 million from the sale of upstream assets in the Philippines, favorable tax items of $440 million in international upstream, and foreign currency effects which increased earnings by $514 million.
 
“Financial results in future periods are expected to be depressed as long as current market conditions persist,” the supermajor said in a statement.
 
The reduced capex, the previously announced suspension of share buybacks, and additional asset sales “are consistent with our longstanding financial priorities: to protect the dividend; to prioritize capital that drives long-term value; and to maintain a strong balance sheet,” said Michael Wirth, Chevron’s chairman of the board and chief executive officer.