U.S. energy firm Chevron announced that it will take a US$ 10 billion to US$11 billion post-tax impairment charge in its Q4 2019 results.
In a statement, Chevron said that after its downward revision in its longer-term commodity price outlook, the company will reduce funding to various gas-related opportunities including Appalachia shale, Kitimat LNG, and other international projects. Chevron added that it was evaluating its strategic alternatives for these assets, including divestment.
In addition, the revised oil price outlook resulted in an impairment at Big Foot. Combined, these actions are estimated to result in non-cash, after tax impairment charges of $10 billion to $11 billion in its fourth quarter 2019 results, more than half related to the Appalachia shale.
Chevron Chairman and CEO Michael Wirth said: “We believe the best use of our capital is investing in our most advantaged assets. 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.”
Tom Ellacott, senior vice president, corporate analysts, at Wood Mackenzie said: “The charge reflects a downward revision to its longer-term price outlook and reduced future investment in gas opportunities, with the Appalachia shale gas play accounting for more than half of the impairment charge. The announcement continues a wave of write-downs related to price downgrades. US shale gas assets have been hardest hit, reflecting the weak outlook for US gas prices. We expect the trend of write-downs to continue as price outlooks are adjusted down.”