Chevron posts $8.3 billion loss on write downs, job cuts

Chevron Corp on Friday reported an $8.3 billion loss on asset writedowns from plummeting fuel prices, an forced exit from Venezuela and expenses tied to thousands of jobs cuts.

Chevron Corp on Friday reported an $8.3 billion loss on asset writedowns from plummeting fuel prices, an forced exit from Venezuela and expenses tied to thousands of jobs cuts. Multibillion-dollar asset writedowns have become a prominent part of second-quarter energy results, as a global oil glut emerged as the COVID-19 pandemic cut fuel demand. Chevron rivals Total, Royal Dutch Shell, and Eni each wrote down billions of dollars in assets. BP has signaled an up to $17.5 billion hit.

Chevron wrote down its oil and gas production properties by $5.6 billion, including its entire investment in crisis-ravaged Venezuela, where it was the last major U.S. oil company still operating until ordered to wind down business by the Trump Administration. The loss also includes $1 billion to cover severance pay for up to 6,700 of its 45,000-person staff to leave their jobs in a global restructuring.

The massive writedowns reflect the global economic downturn caused by the pandemic, and follow a $10 billion writedown of mostly natural gas properties in the fourth quarter of 2019. Oil companies are reducing the value of holdings as a realization grows that a deepening economic downturn could depress energy prices for years. The total value of U.S. goods and services produced last quarter fell at a 32.9% annual rate, the deepest decline in economic activity in modern history.

"The economic impact of the response to COVID-19 significantly reduced demand for our products and lowered commodity prices," said Chief Executive Michael Wirth in a statement, citing the lower demand for the writedowns. The company's output last quarter fell by about 189,000 barrels of oil and gas compared with a year ago, reflecting its efforts to limit losses and earlier property sales.

The writedown of oil and gas properties included non-shale operations in the Permian Basin, the top U.S. oilfield, offshore Gulf of Mexico fields, and undefined properties outside the United States. The writedowns pushed Chevron's loss to $8.27 billion, or $4.44 a share, compared to a profit of $4.3 billion, or $2.27 a share, a year ago. Adjusted loss was $3 billion, or $1.59 per share, compared to a profit of $3.4 billion, or $1.77 per share, last year, it reported.

The loss reflects an average 65% reduction in the prices received for its petroleum produced last quarter as demand plummeted amid COVID-19 travel restrictions and declining industrial demand for fuels. The company's stock was indicated 3.6% lower in pre-market trading on Friday. It closed at $86.27 on Thursday, down 29% from the start of the year.

Chevron had long resisted leaving Venezuela, arguing its presence helped support local workers and any exit would hand over its assets to Russian or Chinese oil companies. It has operated in the country for nearly 100 years through joint ventures with the Venezuelan state oil company PDVSA. But the Trump administration gave Chevron until December to wind down the business amid U.S. sanctions designed to oust the government of President Nicolas Maduro.

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