Exxon Mobil on Monday said it will make "significant" cuts to spending in the face of the unprecedented slide in oil prices due to the global coronavirus outbreak, which sent its shares to a 17-year low.
It was a stunning reversal for the largest U.S. oil producer, which two weeks ago pledged to "lean in" to the market drop and maintain outlays in a belief oil demand would rise in the long run.
Other major oil companies have slashed costs amid falling demand and newly unbridled output by top producers Saudi Arabia and Russia. U.S. shale firms have outlined plans to cut expenses by 25% to 30% to cope with this year's massive drop in oil prices and demand.
U.S. crude futures on Monday settled under $29 a barrel, down from $61 at the start of the year. The decline has cut new drilling and led producers to seek price cuts from suppliers.
Weaker demand and rising supply could lead to a 6 million barrel per day surplus by April, further pressuring prices. Exxon shares fell on Monday to $34.49, a level last touched in 2003, and sent its dividend yield to a record 10.1%.
The stock gained $1 in late trading on the expense cuts.
"We are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term," Exxon Chief Executive Darren Woods said in a statement. "We remain focused on being a safe, low-cost operator and creating long-term value for shareholders."
His statement did not address whether cuts would affect Exxon's shareholder dividend, which consumed $14.65 billion last year. A spokesman declined to comment on any change to the payout.
The company earlier budgeted between $30 billion and $33 billion for projects this year, sharply up from the $23 billion it spent in 2017, Woods' first year as CEO. Exxon could cut 10% to 12% from its outlays and reduce this year's capital spending to between $28 billion and $29 billion, said Matt Murphy, an analyst at Tudor, Pickering, Holt & Co.
"Protecting the balance sheet and dividend is the priority for this company," said Murphy, who assigned a low probability to a dividend cut. Exxon could quickly lower spending in U.S. shale, where it plunked down $6 billion in 2017 for drilling leases in the Permian Basin and where it has run 58 drilling rigs, analysts said. It aimed to pump 1 million barrels a day from the field by 2024.
The company also is spending billions of dollars on oil exploration and production off the coast of Guyana, on liquefied natural gas production, and to boost chemicals output along the U.S. Gulf Coast.
Exxon has asked non-essential employees at several locations to work from home to reduce the risk of spreading the coronavirus among its offices and refineries.
The world's largest publicly traded oil company, Saudi Aramco, last week outlined plans to cut spending by $2.8 billion to $7.8 billion. BP and Chevron also promised unspecified expense cuts.
(Reporting by Gary McWilliams; Editing by Sam Holmes and Leslie Adler)