The global oil price war and the coronavirus pandemic have prompted some international majors and national companies to announce significant cuts in operational costs and in capital expenditures (capex) along with the suspension of their share buyback programmes.
Shell has decided to reduce its 2020 capital expenditure by US$5bn, from US$25bn to US$20bn (-20%) and its operating costs by US$3-4bn over the next 12 months compared to 2019 levels. The group will thus save US$8-9bn of free cash flow on a pre-tax basis. It will maintain its plans to divest more than US$10bn of assets in 2019-2020, but the timing will depend on market conditions. Shell's buyback programme (US$1bn plan) has been suspended.
Chevron will cut its capital expenditure by US$4bn, from US$20bn to US$16bn (-20%). Half of the investment cut will occur in upstream unconventionals (US$2bn, mainly in the Permian Basin in the United States), US$700m in upstream projects and exploration, US$500m in upstream-base business in the United States and worldwide, and US$800m in downstream, chemicals and other activities. In addition, Chevron aims to reduce its operating costs by more than US$1bn by the end of 2020 and suspends its US$5bn annual share repurchase programme, after repurchasing US$1.75bn in the first quarter of 2020.
Total will reduce its capital expenditure by more than US$3bn, from US$18bn to less than US$15bn (- 20%) and its operating costs by US$800m in 2020. Plans to achieve a US$2bn share buyback in 2020 have been suspended (US$550m repurchased in the first two months of 2020).
In addition, Algeria's national oil company Sonatrach has decided to halve its 2020 investments, from US$14bn to US$7bn, to preserve its foreign exchange reserves.