US ExxonMobil cuts capex by $10bn, Plain All American by $750m

HOUSTON (ICIS)–ExxonMobil is to cut 2020 capital expenditure (capex) by 30% or $10bn, the US energy and petrochemicals major said on Tuesday.

Midstream energy firm Plains All American also announced a 33% or $750m cut in capex.

The companies are reacting to low commodity prices amid oversupply and demand weakness from the coronavirus pandemic.

EXXONMOBIL
ExxonMobil’s capital investments for 2020 are now expected to be about $23bn, down from the previously announced $33bn.

In addition, the company will reduce cash operating expenses by 15%.

The largest share of the capital spending reduction will be in the Permian Basin, “where short-cycle investments can be more readily adjusted to respond to market conditions, while preserving value over the long term,” it said.

Also, a final investment decision for the Rovuma liquefied natural gas (LNG) project in Mozambique, expected later this year, has been delayed, it said.

In chemicals and other downstream operations, the timing of expansion plans for select facilities across the company’s portfolio “will be adjusted to capture efficiencies, slow spending pace and better align with a return in commodity demand,” it said.

Despite the reductions, ExxonMobil expects to meet its projected investment of $20bn on US Gulf Coast manufacturing facilities made in its 2017 “Growing the Gulf initiative”.

The company also expects to reach its proposed US investment of $50bn over five years announced in 2018, it said.

“The long-term fundamentals that underpin the company’s business plans have not changed – population and energy demand will grow, and the economy will rebound,” added CEO Darren Woods.

PLAINS ALL AMERICAN
Plains All American will be reducing its 2020-2021 capital programme by 33%.

Plains’ total expansion capital for 2020-2021 is now targeted to be about $1.55bn, or $750m lower than the previously targeted $2.3bm capital programme – and $1.35bn (47%) lower when eliminating $600m of assumed JV project financing, net to Plains, for the Red Oak project, which has been deferred, it said.

As for assets sales, the company said that it closed an incremental sale on 1 April, which generated proceeds of $165m and brings year-to-date proceeds to about $245m.

An additional $195m asset sale remains under definitive agreement and is expected to close later in the year, Plains said.

Plains is also reducing distributions on its common units by 50%, for a reduction of about $525m on annualised, it said.

“We are taking a number of actions in response to the current dynamic and uncertain market conditions to further strengthen our balance sheet and further enhance our liquidity and long-term financial flexibility,” said CEO Willie Chiang.

“These actions include significantly reducing and continuing to challenge our capital program, reducing our distribution, progressing asset sales, and reducing costs, while remaining focused on operating safely and responsibly,” he said.

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