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.
Cuts already announced by seven 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 $127 billion.
Norway’s Equinor <EQNR.OL> said on Wednesday it would cut capital expenditure, or capex, by some $2 billion while Chevron <CVX.N> said on Tuesday it would slash its capex this year by $4 billion.
Others such as U.S. giant Exxon Mobil Corp <XOM.N> and Britain’s BP <BP.L> have said they will cut capital expenditure but haven’t given specific figures as yet.
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, https://fingfx.thomsonreuters.com/gfx/editorcharts/GLOBAL-OIL-CAPEX/0H001R8JFCHE/eikon.png)
Oil prices have slumped 60% since January to below $30 a barrel.
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, https://fingfx.thomsonreuters.com/gfx/editorcharts/GLOBAL-OIL-MAJORS/0H001R8HMCF5/eikon.png)
(This story corrects date, number of companies and spending plans total in second paragraph)
(Reporting by Ron Bousso; Editing by Elaine Hardcastle)