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Chevron cheers investors by cutting spending but vows to keep dividend

Chevron stock lifted after the oil major announced cost-cutting measures, but promised not to slash its investor payout despite a tightening squeeze from falling crude prices.

The Saudi Arabia oil price war with Russia that started on 10 March has taken a toll on oil & gas companies around the world, as oil prices have declined by nearly 30% since the announcement, which has resulted in severe losses for the entire industry.

So far, the NYSE ARCA Oil & Gas Index (XOI), which tracks some of the largest companies in the industry around the world, has lost almost 24% of its value as a result, even though some of this drop has also been triggered by the widespread sell-off associated with the coronavirus outbreak.

 

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Most oil & gas companies said that they will cut capital investments and other non-essential spending they planned to roll out in 2020 to mitigate potential losses from lower oil prices. Chevron has joined the party today by telling shareholders it has suspended its $5bn share buyback program, as well as announcing a 20% cut capital spending this year.

These measures follow similar measures from other major oil & gas companies such as Exxon, Royal Dutch Shell, and Total.

“Our dividend is our number one priority and it’s very secure,” Chevron chief executive Michael Wirth (pictured) told CNBC on Tuesday. “We’re taking actions to preserve cash. It will have some impact on production in the near term, but we’ve stayed with our financial priorities, which include protecting the dividend.”

Stock in California-based Chevron started morning trading with a strong 16% gain that sent the price of the stock to $65 per share but later stabilized at around $61 – $62 per share.

Chevron’s rally has contributed to the session’s positive outlook, even though the major driver continues to be the market’s positive expectation around the $2trn economic stimulus package that the White House has been pushing Congress to approve to mitigate the impact of the coronavirus outbreak.

 

 

 

 

 

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    Alejandro Arrieche

    Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.

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