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Chevron expects US$10-11b hit in Q4; plans sale of natural gas assets
US oil major Chevron Corp on Tuesday said that it expects to write down the value of its assets by US$10 billion to US$11 billion this quarter and is considering selling some natural gas projects to prepare for long term low prices.
The second-largest US oil company, which plans to hold its 2020 spending programme flat at US$20 billion, said it may sell shale gas properties and its stake in a Canadian liquefied natural gas project.
The California-based Chevron and other energy companies have pledged to restrain spending after the collapse in oil prices earlier this decade forced many to borrow to cover the costs of expensive and long-term projects.
Chevron said it expected writedowns this quarter related to a deepwater Gulf of Mexico project, which needs higher oil prices to churn a profit, and shale gas in Appalachia, which has suffered from low natural gas prices. It is considering selling its stake in Appalachian shale and the proposed Kitmat LNG project in Canada.
"With capital discipline and a conservative outlook comes the responsibility to make the tough choices necessary to deliver higher cash returns to our shareholders over the long term", the company's chief executive officer Michael Wirth said. He is preparing sweeping changes that would cut costs and streamline operations with expectations of lower-for-longer oil and gas prices, according to people familiar with the matter.
Chevron recently warned of massive cost overruns at a giant Tengiz oil project in Kazakhstan.
Overall costs are projected to rise 25 per cent to US$45.2 billion, with Chevron's share of the overrun expected to be about US$4 billion to US$5 billion. It plans to spend about US$3.75 billion on the project next year.
Chevron has been among the strongest performers among the big oil majors but reported a 36 per cent drop in third-quarter profit, hit by lower oil and gas prices and refining margins, and warned higher costs would affect current-quarter results.
Chevron plans to spend US$4 billion in 2020 in the Permian Basin, the top US oil field in Texas and New Mexico, and another US$1 billion on international shale projects. It had planned to spend around US$5.2 billion this year.
It will spend US$2.8 billion on its business that refines, transports and markets fuels and petrochemicals, up about US$300 million from this year's budget. REUTERS