Chevron plans to slash budget to save cash for dividend

Oil and gas major Chevron Corp will slash its capital budget by as much as 36 per cent in 2017 and 2018, a cash-saving bid to preserve its 90-year-old dividend as it copes with crude prices near 10-year lows.

The outlook on Tuesday highlights the unease permeating the energy industry as executives try to contend with what many are forecasting to be crude prices below $50 per barrel through at the end of the decade.

Wall Street has pressured many oil producers to slash their quarterly payouts as a way to weather the low-price storm. Already, Noble Energy Inc (NBL.N), ConocoPhillips (COP.N) and Anadarko Petroleum Corp (APC.N) have done so.

Chevron’s dividend, like that of rival Exxon Mobil Corp (XOM.N), is considered near-sacrosanct by retail investors and wealth managers alike, being a steady source of cash in a time of low interest rates and stagnant wages.

“We have a shareholder base that values current income,” Chevron Chief Executive Officer John Watson told reporters at the company’s annual investor day in New York. “Continuity in the dividend is important to them, and we’re confident we can maintain and grow it.”

San Ramon, California-based Chevron has paid a dividend since 1926 and raised its annually for more than 28 years, paying out $8 billion to shareholders in 2015 alone.

Exxon paid out $12 billion in dividends last year, and has also not cut its payout.

Both companies, however, have curtailed share buybacks. Chevron Chief Financial Officer Pat Yarrington said on Tuesday the company has no plans to resume repurchases.