Chevron plans steep budget cuts

SAN RAMON, December 10, 2015 – Chevron announced significant cuts in its production and exploration budget, as part of a plan to cut capital expenditure by 24% to $26.6 billion. The slump in oil and gas prices is forcing companies to hold back on investing in the development of new fields and resort to large budget cuts.

CEO John Watson said Tuesday that the company’s priority was to pay shareholders’ dividends. With a steep cut in its budget, exploration for new oil and gas reserves will drop from $3 billion this year to $1 billion next year. Chevron is also cutting production spending in the US for shale operations by 34%, down to $5.4 billion.

Watson cited the near-term price outlook for oil as the reason for the company’s discretion in projects that have not reached final investment decision. Several other oil companies have made similar cuts, with Eni reducing its annual dividend in March.

Oil companies have announced cancellations and delays to projects worth more than $220 billion this year. International consultancy Wood Mackenzie estimates that this will result in an output reduction of 2 million barrels per day by 2020.

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