Chevron to take up to US$4 billion impairment hit in Q4

CHEVRON said on Tuesday (Jan 2) it would record an impairment to a portion of its US upstream assets, primarily in California, and take losses related to oil and gas production assets sold in the US Gulf of Mexico (GoM).

The oil major, in a filing, said it expects to take non-cash, after-tax charges of US$3.5 billion to US$4 billion in the results of the fourth quarter of 2023.

It said the impairment of California assets was due to continuing regulatory challenges in the state, which has resulted in lower anticipated future investment levels in its business plans.

The company, however, expects to continue operating the impacted assets for many years to come.

Chevron added the loss recognised against the sold GoM assets were related to abandonment and decommissioning obligations, as companies that purchased those assets had filed for protection under Chapter 11 of the US Bankruptcy Code.

“We believe it is now probable and estimable that a portion of these obligations will revert to the company (Chevron),” the oil major added in the filing. It expects to undertake the decommissioning activities on these assets over the next decade.

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Wall Street analysts have trimmed their fourth-quarter earnings estimates for Chevron as a series of operational setbacks are poised to bleed into 2024.

Chevron was hit by reversals at two key oil producing regions – the US Permian and Kazakhstan – in 2023 and its hopes for a quick approval of a US$53 billion acquisition of rival Hess Corp have also dimmed. REUTERS