Please ensure Javascript is enabled for purposes of website accessibility

Chevron Eyes Spending, Production Cuts Amid Oil Rout

By Matthew DiLallo - Mar 10, 2020 at 10:36AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The oil giant had reaffirmed its long-term spending plan last week.

Oil giant Chevron (CVX 2.69%) is considering making a change to its near-term operating plan amid yesterday's historic crash in crude oil prices, according to a Reuters report. The company could reduce both its capital spending as well as its oil and gas production. 

On March 3, Chevron held its annual Security Analyst Meeting, where it outlined its five-year spending and operating plan. At the time, the oil producer said it would invest $19 billion to $22 billion per year through 2024 on new oil and gas projects. That spending level would double its free cash flow per share by 2024, assuming oil averaged $55 a barrel. Because of that, Chevron estimated that it would be able to return $75 billion to $80 billion in cash to investors during that timeframe via its dividend and share repurchase program. 

A drilling rig in the water with the sun setting in the background.

Image source: Getty Images.

However, crude prices have since crashed into the $30s following the collapse of an alliance between OPEC and Russia, resulting in an all-out price war between Saudi Arabia and Russia. That's forcing Chevron and other producers to reconsider their near-term operating plans.

Several smaller U.S. producers have already announced a reduction in their activity level. Diamondback Energy (FANG 3.99%), for example, has immediately dropped three of its nine well completion crews and plans and plans to cut three of its drilling rigs in the coming weeks. Meanwhile, Parsley Energy (PE) eliminated two of its five well completion crews and plans to reduce its rig count from 15 to 12 as soon as practical.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chevron Corporation Stock Quote
Chevron Corporation
CVX
$144.56 (2.69%) $3.78
Diamondback Energy, Inc. Stock Quote
Diamondback Energy, Inc.
FANG
$114.68 (3.99%) $4.40
Parsley Energy, Inc. Stock Quote
Parsley Energy, Inc.
PE

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
322%
 
S&P 500 Returns
113%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.