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.”