Energy industry analysts at Wood Mackenzie said Thursday morning that they have identified $380 billion in capital spending (capex) cuts on 68 existing oil and gas development costs. The slowdown will stifle the development of some 27 barrels of oil equivalent, the analysts said.
We wondered which of the big energy companies had announced the biggest cuts so far, and how big those cuts are. To no one’s surprise, our candidate for the most drastic cuts to capital spending has got to be Petroleo Brasileiro S.A. (NYSE: PBR). Petrobras has announced a reduction of some 25% in its five-year spending (2015 through 2019) from $130 billion to $98.4 billion.
When the company first announced the development of its massive offshore reserves, it planned to spend north of $220 billion. The plan was cut to $130 billion in June of 2015, and then cut again earlier this month. The 2016 capital budget was slashed from $27 billion to $20 billion.
On top of the capex cuts, Petrobras also plans to cut production by around 2%, from a previously planned total of 2.185 million barrels a day to 2.145 million.
In early December, Chevron Corp. (NYSE: CVX) announced that it planned to cut its 2016 capex budget by 24% year over year to $26.6 billion. The lion’s share ($18.6 billion) of the spending will go to international upstream projects, while U.S. upstream projects are targeted to spend $5.4 billion. Chevron’s massive investments in key liquefied natural gas (LNG) projects are at the point where another year of big investments is needed before production begins to offset some of the costs. The bad news for Chevron is that LNG prices are less than half what they were when these projects got the go-ahead.
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