Oil and gas major Chevron said on Tuesday that it would take non-cash, after tax charges of US$3.5–4bn for the fourth quarter of 2023 as it contends with depleted production from its US upstream assets, particularly in California.
According to Reuters, the US-based company said in a securities filing that it anticipates lower future investments levels in its business plans due to continuing regulatory challenges but expects to continue operating the impacted assets for “years to come”.
Chevron is in the midst of buying fellow American Oil company, Hess’ share in the Stabroek Block offshore of Guyana.
Chevron also said the US$4bn figure includes losses associated with the abandonment and decommissioning of previously sold wells and pipelines in the US Gulf of Mexico. The company plans to decommission affected assets over the next decade, according to the report.
The company will exclude the charges from its adjusted earnings, the filing added. The filing did not break down the allocations of write-downs in California and the Gulf.
“California’s policies have made Chevron’s investments in its home state riskier than investing in other states,” Andy Walz, Chevron’s president of Americas products, wrote to state officials in November Reuters said. “In the past year, we have cancelled several projects due to permitting challenges,” he added.
Chevron produces approximately 75,000 barrels of oil and gas per day from its California fields. Ongoing operational and business setbacks have led Wall Street analysts to trim earnings estimates for Q4. It is also lagging behind its four biggest rivals – Shell, ExxonMobil, BP and TotalEnergies – in stock performance.
However, once finalised, Chevron’s $53bn all-stock takeover of fellow US oil and gas company Hess is expected to boost the company’s production of the two fuels by more than 10%, although hopes of speedy approvals from regulators are fading fast.
Before Tuesday’s securities filing, Chevron was expected to report a lower Q4 profit of US$6.68bn, or US$3.27 per share, according to the London Stock Exchange Group. This compares with a profit of US$7.8bn, or $4.09 per share, for the same period in 2022.
On Tuesday, it was also reported that the five biggest oil companies, including Chevron, are set to reward investors with record payouts worth more than US$100bn combined.
Reuters also reported that U.S. Senate Majority Leader Charles Schumer and 22 other Democratic senators wrote to the U.S. Federal Trade Commission on November 1st last year, saying multi-billion dollar acquisitions by oil and gas giants Exxon Mobil (XOM.N) and Chevron (CVX.N) could lead to higher prices for consumers.
In November, Exxon – the major oil company here – proposed buying Pioneer Natural Resources (PXD.N) for US$60 billion and Chevron agreed to acquire Hess (HES.N) for US$53 billion.
The deals would hurt Exxon’s and Chevron’s midstream competitors, said the signatories of the letter, who included Senators Amy Klobuchar, chair of the Judiciary Committee’s antitrust panel, and Elizabeth Warren, an antitrust hawk.
“These new market dynamics could result in price hikes for midstream customers, and such added costs are often passed downstream to retail customers, including drivers at gas stations,” the senators wrote.
