It Begins: Occidental Is First US Energy Major To Slash Dividend, CapEx

Back in 2015, after the price of oil cratered after Saudi Arabia decimated OPEC during the 2014 Thanksgiving massacre, US shale companies scramble to slash dividend and capital spending in order to preserve liquidity in a time when virtually nobody was cash flow positive with oil trading in the $30. The result, was a capex contraction and eventually, a manufacturing recession which swept across the US.

Fast forward 5 years when the Saudis have done it again, only this time US shale companies and other majors are wasting no time to conserve cash, and moments ago Occidental, whose stock has gotten crushed in the past few months…

… became the first US major to announced it was slashing its dividend from 79 cents to just 11 cents, a record low…

… and more importantly, cutting CapEx. From the press release:

cidental Petroleum Corporation (NYSE:OXY) announced today that its Board of Directors approved a reduction in the company’s quarterly dividend to $0.11 per share from $0.79 per share, effective July 2020. The company also announced it will reduce 2020 capital spending to between $3.5 billion and $3.7 billion from $5.2 billion to $5.4 billion and will implement additional operating and corporate cost reductions.

“Due to the sharp decline in global commodity prices, we are taking actions that will strengthen our balance sheet and continue to reduce debt,” said Vicki Hollub, Occidental’s President and Chief Executive Officer. “These actions lower our cash flow breakeven level to the low $30s WTI, excluding the benefit of our hedges, positioning us to succeed in a low commodity price environment.”

And as all other US E&PS rush to follow in OXY’s footsteps, and capital spending grinds to a halt, the next manufacturing recession has officially begun, courtesy of Saudi Arabia.