Chevron to writedown value of assets by $10-$11 billion during fourth quarter

In a significant development, Chevron Corp stated, it will be writing down the value of its assets by $10 billion to $11 billion this quarter; the U.S. oil major is also considering selling some of its natural gas projects as to as prepare itself for long term low prices.

Chevron Corp, the second-largest U.S. oil company, stated, it plans on maintaining its 2020 spending program at $20 billion. It is also weighing its options to divest its assets in shale gas properties as well as its stake in a Canadian liquefied natural gas project.

Much like its peers, Chevron has pledged to cut back on its spending following the collapse in oil prices earlier this decade, which incidentally forced many to borrow to cover the costs of long-term projects.

In a statement, Chevron disclosed it expects to writedown the value of its assets related to a deepwater project in the Gulf of Mexico, which needs higher oil prices to churn a profit; it is also considering a similar move on its shale gas project in Appalachia, which has suffered from low natural gas prices. It is also 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”, said Michael Wirth, Chevron’s Chief Executive in a statement.

Wirth is preparing the company for sweeping changes, which includes cost cutting and streamlining operations based on expectations of low long term prices of these commodities.

Chevron’s writedown of oil assets was unexpected, said Jennifer Rowland, an analyst with Edward Jones.

According to Pavel Molchanov, an analyst at Raymond James, Chevron’s production for 2020 is expected to grow at 1%, “much slower than the 7% in 2018 and 4% in 2019”.

Chevron aims to spend $2.8 billion on its business that refines, transports and markets fuels and petrochemicals, up by about $300 million from this year’s budget.

Chevron’s shares are up by about 8.4% this year.

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