(Reuters) – U.S. oil major Chevron Corp (CVX.N) on Tuesday said it expects to write down the value of its assets $10 billion to $11 billion this quarter and is considering selling some natural gas projects to prepare for long term low prices.
FILE PHOTO: An entrance sign at the Chevron refinery, located near the Houston Ship Channel, is seen in Pasadena, Texas, U.S., May 5, 2019. REUTERS/Loren Elliott
The second-largest U.S. oil company, which plans to hold its 2020 spending program flat at $20 billion, said it may sell shale gas properties and its stake in a Canadian liquefied natural gas project. San Ramon, 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”, Chief Executive Michael Wirth said.
Wirth 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% to $45.2 billion, with Chevron’s share of the overrun expected to be about $4 billion to $5 billion. It plans to spend about $3.75 billion on the project next year.
Chevron has been among the strongest performers among the big oil majors but reported a 36% 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 $4 billion next year in the Permian Basin, the top U.S. oil field in Texas and New Mexico, and another $1 billion on international shale projects. It had planned to spend around $5.2 billion this year.
It will spend $2.8 billion on its business that refines, transports and markets fuels and petrochemicals, up about $300 million from this year’s budget.
Chevron shares closed at $117.89 on Tuesday, up a fraction before it released its 2020 plans. Its shares are up about 8.4% this year.
Reporting by Jennifer Hiller in Houston, Arundhati Sarkar in Bengaluru; Editing by Sriraj Kalluvila, Tom Brown and Richard Chang
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