European oil majors Shell and Total announced Monday plans to cut capital expenditure by around 20% and suspend their share buybacks as part of a raft of measures to strengthen balance sheets in response to collapsing oil prices and the economic impact of the global coronavirus pandemic.
Shell said it would cut its cash spending by $5 billion from planned levels to $20 billion or below in 2020 and reduce its operating costs over the next 12 months from 2019 levels. Separately, Total announced a $30/b action plan under which it will cut more than $3 billion, or over 20%, mostly from its organic capex this year, taking its net investments to less than $15 billion.
“The combination of steeply falling oil demand and rapidly increasing supply may be unique,” Shell CEO Ben van Beurden said in a statement to the London Stock Exchange. “But Shell has weathered market volatility many times in the past.”
The oil major said the measures, which include reducing underlying operating costs by up to $4 billion, would together contribute up to $9 billion to its free cash flow over the year.
Total said it also planned to trim a further $500 million from operating costs this year compared with 2019, instead of the $300 million previously announced. It said its capex cuts would come mainly in the form of short-cycle, flexible spending, “which can be arbitrated contractually over a very short time period.”