ExxonMobil posted its first quarterly loss following its 1999 merger and Chevron pledged to further slash spending on Friday as the two largest US oil companies grapple with the crash in crude.
Exxon revealed Friday a surprise loss of $610 million during the first three months of the year. The red ink was driven by a $2.9 billion charge linked to writedowns from the collapse in oil prices.
The biggest US oil company, Exxon has never reported a quarterly loss since its mega merger with Mobil in November 1999. Shares fell 4% Friday morning.
Both Exxon and rival Chevron are hunkering down to defend their coveted dividends from cheap oil.
Exxon announced it will slash its 2020 spending by 30% to $23 billion. The company also plans to cut operating expenses by 15%.
"Our company remains strong and we will manage through the current market downturn as we have for decades," Exxon CEO Darren Woods said in a statement. "Today's circumstances are certainly unique, but our people have the experience, our business has the scale, and we have the financial strength to see us through and emerge stronger than ever."
Dividend is No. 1 priority
Chevron is conserving cash by cutting its 2020 spending targets by up to $2 billion. That would bring the company's budget 30% below the goals entering the year. And Chevron is pledging to cut costs by $1 billion.
The moves by Big Oil will ripple across the oil industry, translating to lower production and potential job cuts.
Both companies are hoping to avoid having to lower their dividends -- something their European rivals are already doing. Chevron hasn't touched its dividend since the Great Depression.
"We're in a different place than others. We entered this crisis with the strongest balance sheet in the industry," Pierre Breber, Chevron's chief financial officer, told CNN Business in an interview.
Even if Brent crude stayed at $30 a barrel for the next two years, Breber said Chevron has the financial resources to keep paying its dividend.
"The dividend is our No. 1 financial priority," he said.
By contrast, Royal Dutch Shell slashed its dividend by 66% earlier this week, the first such cut for the oil giant since World War II. Likewise, last week Equinor, the Norwegian oil company, lowered its dividend by 67%. BP, on the other hand, maintained its dividend but said it would keep the payout under review.
Will Big Oil scoop up smaller rivals?
Chevron's first-quarter profit jumped 38% to $3.6 billion. But that increase was driven by one-time items, including asset sales and currency swings. Revenue fell by less than feared to $31.5 billion.
The underlying results looked weaker. Chevron's cash flow from operations dropped 8% to $4.7 billion.
Chevron painted a gloomy picture about the future, warning that results are likely to remain "depressed as long as current market conditions persist."
The oil industry has been crushed by an historic collapse in demand caused by the coronavirus pandemic. The energy market is also suffering from excess supply caused by a price war between Saudi Arabia and Russia.
Saudi Arabia and Russia have agreed to cut supply, but the prospect of a return to pre-crisis demand remains murky.
"We expect demand to recover, but there's no doubt there is the potential for less commuting as people know they can work from home," Breber, the Chevron CFO, said. "We are prepared for lower for longer."
The turmoil in the oil industry -- analysts say dozens of independent US shale oil companies could go bankrupt -- could create an opportunity for Exxon and Chevron to scoop up smaller companies on the cheap.
However, Chevron signaled it's not looking to make a strategic acquisition -- at least not yet.
"That's not our focus now," Breber said. "Our focus is on managing this crisis. As well positioned as we are, it's difficult for us as well."
But Breber opened the door to making a purchase once the market stabilizes.
"We entered this crisis stronger than others and we intend to exit this crisis stronger than others. If we do that, we'll be positioned at that time to consider potential acquisitions," he said.