Chevron Announces Massive Non-Cash Writedowns and Challenges in California Operations

By Editor


Chevron revealed on Tuesday its intention to take significant non-cash writedowns relating to U.S. oil and gas production, notably in California, and expenses for securing abandoned wells and pipelines in the U.S. Gulf of Mexico that had been previously divested.

The U.S. oil giant anticipates incurring non-cash charges, after taxes, ranging from $3.5 billion to $4 billion in its fourth-quarter results for 2023, as outlined in a securities filing.

The breakdown of the writedowns between the two regions was not detailed in the filing. However, the losses acknowledged concerning its former offshore Gulf of Mexico properties pertain to abandonment and decommissioning obligations.

The company, along with others, has been entangled in disputes over claims mandating payments for securing wells, pipelines, and platforms sold to entities like Fieldwood Energy. Fieldwood underwent Chapter 11 bankruptcy proceedings in 2020, and their restructuring strategy shifted the costs of abandoning the offshore properties onto their previous owners.

Chevron elaborated in the filing, stating, “We believe it is now probable and estimable that a portion of these obligations will revert to the company.” The oil major foresees conducting decommissioning operations on these assets over the next decade.

The impairment of California assets was attributed to persistent regulatory hurdles in the state, leading to reduced anticipated future investment levels within the company’s business strategies.

Andy Walz, Chevron’s president of Americas products, communicated concerns to state officials in November, stating, “California’s policies have made Chevron’s investments in its home state riskier than investing in other states. In the past year, we have cancelled several projects due to permitting challenges.”

Nevertheless, Chevron affirmed its commitment to continue operating the affected assets for many years. The company’s website indicates a production of approximately 75,000 barrels of oil and gas per day in fields located in Central California.

Prior to the filing on Tuesday, financial firm LSEG estimated Chevron’s fourth-quarter profit to be $6.68 billion, or $3.27 a share, marking a decline from $7.85 billion, or $4.09 a share, reported in the same quarter a year earlier.

Seven Wall Street firms have lowered their fourth quarter earnings estimates for Chevron by an average 12 percent in the last 30 days, according to investment firm LSEG. None of the 15 firms that LSEG tracks raised their forecast, Reuters news report said earlier.

Estimates for Chevron’s 2024 profit have been cut by an average 10.3 percent in the last 30 days, to $14.17 per share, according to LSEG. Its larger U.S. rival, Exxon Mobil, also had estimates lowered, but by less than 4 percent.

Latest News