Chevron Slashes Spending and Buyback Plans; Vows to Protect Dividend

Chevron CEO Michael Wirth said the oil major has no plans to reduce its dividend, but will be cutting spending and share buyback plans as global oil prices suffer an historic collapse.

Chevron Corp  (CVX) - Get Report slashed its capital spending plans, and halted its share buyback program, while warning of a 'material' coronavirus impact on its 2020 earnings. 

Chevron said it will lower its 2020 spending plans by around 20%, or $4 billion, and expects reduced production from its shale deposits in the Permian Basin.  It's also freezing its share buyback program, which has intended to purchase $4.25 billion in stock between now and the end of the year, although it will hold onto its current dividend payment. 

“With an industry leading balance sheet and a flexible capital program, we believe Chevron is resilient and positioned to withstand this challenging environment,” said CEO Michael Wirth. “Given the decline in commodity prices, we are taking actions expected to preserve cash, support our balance sheet strength, lower short-term production, and preserve long-term value.”  

Chevron shares were marked 13.8% higher in early trading Tuesday to change hands at $61.76 each, but have fallen some 48% since the start of the year.

Last year, Chevron bought back $4 billion in shares and paid $9 billion in dividends even as oil prices swung wildly over the final months of 2019.

This year crude collapse, however, which has taken prices around 60% south of their early January peak, has added to the sector's woes and the broader market downdraft brought on by the coronavirus outbreak.

The ongoing price war between Saudi Arabia and Russia, meanwhile, following the collapse of OPEC's three-year production cut agreement earlier this month, has put even more pressure on the economic viability of shale output in the Permian, which analysts say requires a $50 per barrel price for oil for producers to break even.

WTI futures contracts for May delivery, the benchmark for U.S. oil prices, were last seen trading at around $24.74 per barrel, and have falling more than 60% so far this year after hitting a near two-decade low of $22.50 last week.