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Chevron shares surged Tuesday after the company announced cost-cutting measures, but promised not to slash its dividend despite mounting pressure from falling crude prices.

“Our dividend is our number one priority and it’s very secure,” Chevron CEO Michael Wirth said Tuesday on CNBC’s “Squawk Box.” “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.”

The oil giant said it will cut its capital spending plans for 2020 by 20% and suspend its buyback program in an effort to reduce costs. Shares jumped more than 15% on the news.

West Texas Intermediate crude prices have been nearly cut in half over the last month as oil gets hit on the demand and supply side. The contract is trading around $24.35. As recently as January it traded above $63. International benchmark Brent crude has also taken a hit. It currently trades around $28.11 per barrel.

The coronavirus outbreak has led to demand destruction for crude as travel comes to a near standstill and global economies grind to a halt. In the midst of this, a price war broke out between Saudi Arabia and Russia, with each country seeking to grow its market share. The OPEC+ production cuts that are currently in place expire at the end of this month, meaning nations will soon be allowed to produce as much oil as they want.

Saudi Arabia announced plans to increase its daily production to a record 12.3 million barrels per day in April. By comparison, the kingdom pumped roughly 9.7 million bpd in February. Russia is among the other OPEC+ nations that has said it, too, could ramp up production.

As a potential oil glut has sent prices deeper into bear market territory, President Donald Trump said last week the U.S. could intervene “at the appropriate time.”

Wirth said Chevron is operating under the pretense that the price war between Saudi Arabia and Russia will rage on.

“Certainly political dialogue is always helpful, but I don’t think we can count on it. We’re taking actions on the things that we can control. We’re preparing for a difficult market,” he said. “It’s an uncertain market, which is why we’ve taken actions on the things we can control.”

Chevron shares moved higher on Tuesday, although the stock has shed 48% this year.

“This is the fourth time in my career I’ve seen [crude] prices drop by more than 50% in a very short period of time,” Wirth said. “We’ve been here before, we know what to do, we’re taking action.”



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