Chevron Corporation has announced the cutting of its 2020 capital budget by 20 per cent to $4 billion as part of its response to a significant drop in revenue due to the spread of Coronavirus.

“With an industry leading balance sheet and a flexible capital program, we believe Chevron is resilient and positioned to withstand this challenging environment,” said Chevron Chairman and CEO Michael Wirth.

“Given the decline in commodity prices, we are taking actions expected to preserve cash, support our balance sheet strength, lower short-term production, and preserve long-term value.”

The company is reducing its guidance for 2020 organic capital and exploratory spending by 20% to $16 billion.

Reductions are expected to occur across the portfolio and are estimated as follows: $2 billion in upstream unconventionals, primarily in the Permian Basin, $700 million in upstream projects and exploration, $500 million in upstream base business spread broadly across our U.S. and international assets and $800 million in downstream & chemicals and other cash capital and exploratory expenditures are expected to decrease by $3.3 billion to $10.5 billion in 2020.

Total capital and exploratory spending in the second half of 2020 is expected to be about $7 billion, an annual run rate 30% lower than the approved budget announced in December 2019.

Excluding 2020 asset sales and price related contractual effects, the company expects production to be roughly flat relative to 2019. Note that Chevron’s net production increases about 20 thousand barrels of oil equivalent per day for each $10 movement lower in Brent oil prices due to contractual effects. Permian production by the end of the year is expected to be about 125 thousand barrels of oil equivalent per day, or 20%, below prior guidance.

“The flexibility of our capital program allows us to respond to these unexpected market conditions by deferring short-cycle investments and pacing projects not yet under construction,” said Jay Johnson, Executive Vice President of Upstream, “At the same time, we are focused on completing projects already under construction that will start-up in future years while preserving our capability to increase short-cycle activity in the Permian and other areas when prices recover.”