Norwegian oil firm Equinor plans to cut investments, exploration drilling and operating costs by around $3 billion to help weather the coronavirus crisis and low oil prices.
Equinor, which had already suspended a $5 billion share buyback program, said it would postpone U.S. onshore drilling, where it has invested billions of dollars in recent years, as part of Wednesday’s plan.
The new measures will allow its operations to be cash-flow neutral in 2020 at an average oil price of around $25 per barrel, the company said in a statement.
“We are now taking actions to further strengthen our resilience in this situation,” CEO Eldar Saetre said.
Equinor maintained its planned cash dividend of $0.27 per share for the fourth quarter of 2019, but a spokesman said the board still had to decide on payouts for later quarters.
In the wake of the 2014-2016 oil price crash, Equinor offered shareholders an option to receive the dividend in newly issued shares at a discount instead of cash. This ended in 2017.
Oslo-listed Equinor’s shares were up 5.8% at 0921 GMT, slightly lagging a wider European oil and gas index.
Global oil benchmark Brent is trading at around $28 per barrel, up 2% for the day but down more than 50% this year on falling demand and an expected surge in output.
Equinor said it will cut capital expenditure for 2020 to around $8.5 billion from last month’s $10 to $11 billion goal.
Exploration spending will fall to $1 billion from a planned $1.4 billion, while operating costs will be cut by around $700 million compared to original estimates.
A planned increase in renewable energy investments would go ahead, however, the spokesman said.
Equinor, which reported the world’s first coronavirus case at an offshore platform in Norway, said it had taken measures to contain its spread.
The company said it had maintained its production and the spokesman said there was no change to its output forecast.
In February, Equinor said it expected 2020 oil and gas output to increase by around 7% from a year ago, mainly due to the ramp-up of its giant Johan Sverdrup oilfield, and to have annual average growth of around 3% from 2019 to 2026.
Oslo-based brokerage Sparebank 1 Markets, however, said the spending cuts could hit Equinor’s long-term output.
“There will be a negative change to U.S. onshore and other non-sanctioned production,” it said in client note.