Chevron posts US$8.3 billion loss on write downs, job cuts

Chevron posts US$8.3 billion loss on write downs, job cuts

Chevron Corp posted a quarterly net loss on Friday, as the second largest U.S. oil producer took charges of US$5.2 billion due to a collapse in oil prices due to the coronavirus pandemic and as related lockdowns decimated fuel demand.

Chevron (CVX)'s logo is seen in Los Angeles
FILE PHOTO: The logo of Chevron (CVX) is seen in Los Angeles, California, United States, April 12, 2016. REUTERS/Lucy Nicholson/File Photo

HOUSTON: Chevron Corp on Friday reported an US$8.3 billion loss on asset writedowns from plummeting fuel prices, a forced exit from Venezuela and expenses tied to thousands of jobs cuts.

Multibillion-dollar asset writedowns have become a prominent part of second-quarter energy results, as a global oil glut emerged as the COVID-19 pandemic cut fuel demand. Chevron rivals Total , Royal Dutch Shell , and Eni each wrote down billions of dollars in assets. BP has signaled an up to US$17.5 billion hit.

Chevron wrote down its oil and gas production properties by US$5.6 billion, including its entire investment in crisis-ravaged Venezuela, where it was the last major U.S. oil company still operating until ordered to wind down business by the Trump Administration.

The loss also includes US$1 billion to cover severance pay for up to 6,700 of its 45,000-person staff to leave their jobs in a global restructuring.

The massive writedowns reflect the global economic downturn caused by the pandemic, and follow a US$10 billion writedown of mostly natural gas properties in the fourth quarter of 2019. Oil companies are reducing the value of holdings as a realization grows that a deepening economic downturn could depress energy prices for years.

The total value of U.S. goods and services produced last quarter fell at a 32.9per cent annual rate, the deepest decline in economic activity in modern history.

"It will take years for that to recover and the price for our products is tied to economic activity," said Pierre Breber, Chevron's finance chief, in an interview. The company plans to continue to restrain spending on new projects, he said.

The company's output last quarter fell by about 189,000 barrels of oil and gas compared with a year ago, reflecting its efforts to limit losses and earlier property sales.

The writedown of oil and gas properties included non-shale operations in the Permian Basin, the top U.S. oilfield, offshore Gulf of Mexico fields, and undefined properties outside the United States, he said.

"We would need to see sustained economic recovery and much lower inventory levels before we would add capital back to the Permian or other basins," said Breber. "We're in a lower for longer world where demand is down and there's ample supply."

The writedowns pushed Chevron's loss to US$8.27 billion, or US$4.44 a share, compared to a profit of US$4.3 billion, or US$2.27 a share, a year ago. Adjusted loss was US$3 billion, or US$1.59 per share, compared to a profit of US$3.4 billion, or US$1.77 per share, last year, it reported.

The loss reflects an average 65per cent reduction in the prices received for its petroleum produced last quarter as demand plummeted amid COVID-19 travel restrictions and declining industrial demand for fuels.

Pre-market trading in the company's stock was indicated 3.6per cent lower on Friday. It closed at US$86.27 on Thursday, down 29per cent from the start of the year.

Chevron has resisted leaving Venezuela, arguing its presence was a stabilizing presence and supported local workers. Any exit would hand over its assets to Russian or Chinese oil companies, it has said. Chevron has operated in the country for nearly 100 years, mostly recently through joint ventures with Venezuelan state oil company PDVSA.

But the Trump administration gave Chevron until December to wind down its business there amid U.S. sanctions designed to oust the government of President Nicolas Maduro. Chevron wrote off the US$2.6 billion value of Venezuelan assets, which in June produced 7,000 barrels per day, Breber said.

(Reporting by Jennifer Hiller in Houston and Shariq Khan in Bengaluru; Editing by Shounak Dasgupta and Richard Pullin)

Source: Reuters