Chevron fully wrote down its $2.6bn in assets in Venezuela, along side other impairments mostly related to the lower-price petroleum environment and a gloomy outlook, resulting in an $8.3bn loss for the second quarter.
"We intend to maintain a presence in the country and resume full operations there one day," chief financial officer Pierre Breber said today. The company produced just 7,000 b/d there in June, which Breber said helped trigger Chevron's decision to impair based on accounting rules.
The US administration in April extended authorization for Chevron to keep operating in Venezuela until 1 December. But the waiver conditions prohibited it from drilling, lifting, purchasing or processing Venezuela-origin crude or products, and limited activities to the maintenance of essential operations and contracts.
The new rules mean that Chevron will no longer be able to lift its share of crude from its PetroPiar heavy crude upgrading venture with state-owned PdV. The firm also holds a minority stake in the PetroBoscan venture with PdV in western Venezuela.
Other impairments included some assets in the Permian basin of west Texas and eastern New Mexico, Asia, Africa and the Stampede offshore US Gulf of Mexico project, of which Chevron owns 25pc.
The major, which last week agreed to buy US independent Noble Energy for $5bn, warned that financial results "may continue to be depressed" into the third quarter. The company also took a $1bn charge to cover severance costs for about 6,700 of its employees who were laid off, or about 15pc of its staff.
"That capital will come back when the world needs that energy," Breber said, adding that Chevron is optimistic that petroleum markets bottomed out in the second quarter.
Meanwhile, Chevron and Noble staffers kicked off merger planning meetings today, Breber said. Chevron anticipates a smooth consolidation of operations.
Capital spending for 2020 remains on plan at $14bn, which was the previous guidance after massive cost-cutting this spring.
Chevron produced 3mn b/d of crude equivalent (boe/d) in the period, down by 3pc from the same time in 2019, as it curtailed output this spring when prices nosedived following a spike in global production, coupled with the evaporation of demand in response to the Covid-19 pandemic.
The company expects total 2020 upstream production to be flat from 2019. Wells that had temporary curtailments in May and June are back on line, but it expects 150,000 boe/d to remain curtailed in the third quarter because of Opec+ agreements and another 110,000 boe/d off line related to a turnaround at the Gorgon natural gas project in Australia.
Chevron's average sales price for US crude and natural gas liquids (NGLs) in the April-June quarter was $19/bl, compared with $52/bl in the second quarter of 2019. But its US production of 991,000 boe/d actually was up by 93,000 boe/d from the prior-year period, while international production of 2mn boe/d was down by 189,000 boe/d.
Global upstream operations lost $6.1bn in the second quarter, including impairments, while downstream operations lost $1bn.
Chevron's US refineries took in 581,000 b/d of crude, down by 39pc from the year-prior period, while international refineries processed 589,000 b/d, down by just 2pc.
Chevron's loss stood in contrast to a $4.3bn profit in the second quarter of 2019. Revenues were $16bn in the period, compared with $36bn in the year-prior quarter.
