US-based Exxon Mobil Corp and Chevron Corp decreasing shale oil production in the Permian shale basin following recent reports of reduced investments in the region by both organizations.
The organizations plan for a combined reduction of 800,000 barrels per day in acknowledgment of the dropping crude prices and fuel demand.
Exxon and Chevron have been operating on lower Permian drilling equipment since the market started crashing in March. U.S. crude prices have fallen nearly 70% this year to under $20 a barrel and traded in negative territory on April 20 for the first time ever.
The two oil majors have spent heavily in the last two years to expand their presence in the Permian. Shale production can be brought on faster than deepwater and other oil exploration projects but needs near-constant drilling to control production.
Exxon’s biggest cuts will come in the Permian, “where the short-cycle investments are more readily adjusted,” said Exxon Chief Executive Officer Darren Woods.
He added that because shale wells offer big volumes at first and then decline rapidly, it is “beneficial in long term” to ensure “we’re bringing those high production rates into a market that’s more conducive.” Exxon will sideline 75% of its Permian drilling rigs, keeping 15 operational.
The company reported a $610 million first-quarter loss, its first quarterly loss in three decades, on a nearly $3 billion inventory write-down reflecting lower margins and prices. Chevron posted a $3.6 billion profit on asset sales and enhanced refining results and also said it would further decrease spending this year.