At its annual meeting with analysts on March 3, 2020, Chevron (CVX -0.14%) announced a five-year plan with the potential to distribute more than $75 billion to shareholders. Included in that plan was $5 billion in annual share repurchases and rising dividends, as well as approximately $20 billion per year in capital spending.

But that plan was predicated on the idea that oil prices would stay in the neighborhood of $60 a barrel.

Now, much lower oil prices prevail, global economies are reeling from the impact of the COVID-19 pandemic, and the company has revised its five-year plan dramatically. 

oil rigs in a sunset

Image source: Getty Images.

Production cuts, buyback suspended

Chevron now says that it will reduce its capital spending this year by 20%, or $4 billion. It also cut its guidance for production in the Permian Basin by 20% and suspended its share buybacks. The company stressed, however, that the dividend would not be affected. 

"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," said CEO Michael Wirth.

With crude oil prices now at about half the energy company's previous $60 per barrel target level, Chevron will lower its production, primarily in the Permian Basin. About half of its capital spending cuts will come there, with the balance spread across its portfolio, where the belt-tightening will impact upstream projects and exploration as well as downstream and chemical businesses. 

The company said it continues to move ahead with its efforts to cut operating costs by more than $1 billion in 2020. It also noted that due to the rapidly changing and uncertain environment, there could be material impacts to its future results.