Chevron (CVX 1.22%) announced today that it has updated its long-term capital spending outlook. The oil giant expects to invest $14 billion into organic capital and exploratory projects in 2021. Meanwhile, it sees capital spending averaging between $14 billion to $16 billion per year through 2025. That's roughly 25% below its prior long-term guidance range of $19 billion to $22 billion, which excluded the recently acquired Noble Energy.
Chevron plans to prioritize investments that should grow its long-term value, deliver higher returns, and lower its carbon intensity. The oil company expects to invest more than $300 million in 2021 on investments that advance the global economy's transition to cleaner energy sources. Meanwhile, the bulk of its capital spending will be on its world-class position in the Permian Basin, other unconventional oil and gas basins, and the Gulf of Mexico.
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The decision to reduce capital spending mirrors the approach taken by rival ExxonMobil (XOM 0.71%), which also recently unveiled a reduced long-term capital spending plan. Exxon anticipates investing $16 billion to $19 billion on capital and exploration projects in 2021 and between $20 billion to $25 billion per year through 2025. That's a roughly $10 billion reduction from the long-term investment outlook it issued before the COVID-19 outbreak.
Both U.S. oil giants have shifted their focus from increasing production to protecting their dividends. Chevron's payout yields 5.7%, while Exxon's dividend is at 8.7%. That contrasts with the approach taken by some of their international peers. BP and Shell both reduced their payouts and put a greater emphasis on investing in the energy transition. Chevron's decision to stay its course, albeit at a lower investment rate, could cause it to underperform rivals that are trying to stay ahead of the curve.
