Chevron (CVX) Forecasts Impairment Charge Worth Up to $11 Billion in 4th Quarter

Chevron (CVX) said late on Tuesday that it expects to book an impairment charge of up to $11 billion in the fourth quarter, with more than half related to its Appalachia shale assets amid a downward revision to its commodity outlook.

The company said that as a result of its approach to capital allocation and a downward revision in its longer-term commodity price outlook, the company would reduce funding to various gas-related opportunities including Appalachia shale, Kitimat LNG, and other international projects.

It said that it is evaluating its strategic alternatives for these assets, including divestment. In addition, Chevron said that the revised oil price outlook resulted in impairment at Big Foot.

“Combined, these actions are estimated to result in non-cash, after-tax impairment charges of $10 billion to $11 billion in its fourth-quarter 2019 results, more than half related to the Appalachia shale,” the company said.

The San Ramon, Calif-based company also announced a 2020 organic capital and exploratory spending program of $20 billion. It said that the 2020 budget supports a portfolio of upstream and downstream investments, including the Permian Basin position, the company’s project at TCO in Kazakhstan, and a queue of deepwater opportunities in the Gulf of Mexico.

“We are positioning Chevron to win in any environment by ratably investing in the highest return, lowest risk projects in our portfolio,” Michael Wirth, chief executive of Chevron, said. “This will be the third consecutive year with organic capital spending held flat at $20 billion, continuing our capital discipline through the cycle. Our emphasis on short cycle investments is expected to deliver improved returns on capital and stronger free cash flow over the long-term.”

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Daniel Serrano

Daniel Serrano

Daniel Serrano had acquired considerable experience in writing and editing publications before recruited by Expert Recorder news portal as Editorial Manager. His key task is to conduct effective business reviews based on the most recent business strategies. Due to his stronghold and understanding over finance, marketing, business, and trade-related topics, he is known as a business counselor among the staff. His expertise in business-related topics is quite impressive. His business-related concepts are on fingertips, which aids in illustrating the business-related articles in brief and defined way, clear to even an amateur. He pursued his post-graduation in Finance from a UK-based university.