Chevron CEO talks ‘playbook’ for dealing with a downturn
Chevron CEO Michael Wirth discusses company earnings in the face of unprecedented times and his outlook for the oil industry amid the coronavirus pandemic.
Chevron's quarterly dividend remains "safe and secure," despite upheaval in the oil market that ravaged competitors less prepared for an economic swoon, CEO Michael Wirth said.
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The oil giant entered the downturn with a strong balance sheet and has taken "strong and decisive action to maintain that strength," enabling it to keep up the quarterly payout of $1.29 a share, Wirth told FOX Business' Maria Bartiromo on Friday.
The San Ramon, California-based company said earlier that it would cut capital spending by as much as $2 billion in addition to a previous reduction of $4 billion, taking this year's outlay to as little as $14 billion.
"We know what to do, and we're doing it in the face of a market we've never seen before," Wirth said. "These are certainly unprecedented conditions."
Rival Exxon Mobil said last month it would slash capital expenditures by 30 percent and reduce operating expenses by 15 percent in order to protect its 87-cent per share dividend, and Reuters has reported that Chesapeake Energy, a leader in the shale boom, is preparing for a possible bankruptcy filing.
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Crude oil has tumbled 67 percent this year after Russia and Saudi Arabia began a price war when the Kremlin refused to lower production in tandem with members of the Organization of Petroleum Exporting Countries, or OPEC, to curb the effects of a supply glut.
The surplus grew exponentially worse when governments around the world began shutting down their economies in March to curb the spread of the COVID-19 pandemic, a move that choked fuel demand as consumers refrained from driving their cars as well as flying.
"We've never seen governments around the world restrain economic activity the way we've seen here," Wirth said.
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Demand in the energy industry typically shifts far less, he said, with ups and downs hovering tightly around a long-term trend level. Still, the playbook for coping is no secret, Wirth said: "It really is how you execute."
While many energy projects take a decade or more to design and build, a so-called "long cycle," Chevron benefits from a larger share of short-cycle projects that can be paused and resumed more rapidly, including shale drilling in the Permian Basin in the southwestern U.S.
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"We can respond in months and quarters, not years," Wirth said. "When there's a signal from the market that there's plenty of supply, that's the first place we can go to preserve cash, keeping oil in the ground. We have flexibility in our company that we haven't historically had, and that serves us well at a time like this."
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