Chevron CVX-N said on Tuesday it would take non-cash writedowns on U.S. oil and gas production, primarily in California, and for securing abandoned wells and pipelines in the U.S. Gulf of Mexico that had been previously sold.
The U.S. oil major expects to take non-cash, after-tax charges of between $3.5-billion and $4-billion in its fourth quarter 2023 results, it said in a securities filing.
The filing did not break out the allocations of writedowns between the two areas. The loss recognized against its former offshore Gulf of Mexico properties are related to abandonment and decommissioning obligations.
The company and others have contested claims requiring they pay to secure wells, pipelines and platforms that were sold to Fieldwood Energy and others. Fieldwood filed for Chapter 11 bankruptcy in 2020 and its restructuring plan left costs for abandoning the offshore properties on their former owners.
“We believe it is now probable and estimable that a portion of these obligations will revert to the company (Chevron),” the oil major added in the filing. It expects to undertake the decommissioning activities on these assets over the next decade.
The impairment of California assets was due to what it called continuing regulatory challenges in the state that have resulted in lower anticipated future investment levels in its business plans.
“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. “In the past year, we have cancelled several projects due to permitting challenges.”
The company, however, expects to continue operating the affected assets for many years to come, the filing said. Chevron produces about 75,000 barrels of oil and gas per day in fields in Central California, the company’s website said.
Wall Street analysts have trimmed their fourth-quarter earnings estimates for Chevron as a series of operational setbacks are poised to bleed into 2024.
Before Tuesday’s filing, Chevron was expected to report a lower fourth quarter profit of $6.68-billion, or $3.27 a share, according to financial firm LSEG. That compares to a profit of $7.85-billion, or $4.09 a share, in the same quarter a year ago.