Chevron Slips on Announced $11 Billion Shale-Gas Writedown

Shares trade lower after the oil and natural gas producer says it will write down as much as $11 billion in the fourth quarter, more than half of it from its Appalachia natural gas assets, after a slump in prices.
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Shares of oil and natural gas producer and refiner Chevron (CVX) - Get Report were lower on Wednesday after the company said it expects to write down as much as $11 billion in the fourth quarter, more than half of it from its Appalachia natural gas assets, after a slump in prices.

The San Ramon, Calif.-based company said in a statement released after the market closed on Tuesday that it was looking to sell its shale-gas holdings, along with its Kitimat liquefied natural gas project in Canada. Chevron said it will hold its 2020 spending at $20 billion.

“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”, CEO Michael Wirth said in the statement.

The move comes amid long-term declines in oil prices as well as more recent declines in natural gas prices – both of which have impacted energy producers including Chevron, which despite the challenges has been among the strongest performers among the big U.S. oil majors.

Even so, with the gas glut particularly pronounced in North America, where shale production is flooding local markets, Chevron's decision to recalibrate its focus on more profitable efforts illustrates the company’s discipline in protecting shareholders, Wirth said.

“The best use of our capital is investing in our most advantaged assets,” Wirth said. “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.”

Chevron said it 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.

Analysts polled by FactSet are expecting Chevron to post per-share earnings of $1.58 on revenue of $37.8 billion when it reports its fourth-quarter results on Jan. 31, 2020.

Shares of Chevron were down 0.77% at $117 in morning trading on Thursday. They ended the trading day Tuesday up 0.5% at $117.89. Shares have risen about 8.4% this year.