8-KFinancial EventsRegulation FDExhibits & Filings

CHEVRON CORP 8-K Report, Material Impairment (Dec 10, 2019)

Filed December 10, 2019For Securities:CVX

Summary

Chevron Corporation has announced significant non-cash impairment charges totaling an estimated $10 billion to $11 billion for its fourth quarter 2019 results. These charges are primarily driven by a downward revision in the company's longer-term commodity price outlook, particularly for natural gas. As a consequence, Chevron is reducing funding for several natural gas-related upstream opportunities, including significant shale assets in Appalachia and international projects like Kitimat LNG, and is exploring divestment options for these assets. A portion of the impairment is also attributed to revised oil price outlook impacting the Big Foot project. While these impairment charges are substantial, Chevron emphasizes that they are non-cash and are not expected to result in material future cash expenditures. This strategic recalibration reflects a disciplined approach to capital allocation in response to evolving market conditions. Investors should note that these impairments do not immediately impact cash flow but signal a shift in the company's asset portfolio and future investment focus, with a significant impact stemming from its natural gas operations.

Key Highlights

  • 1Estimated non-cash, after-tax impairment charges of $10 billion to $11 billion for Q4 2019.
  • 2Impairments primarily driven by a revised, lower longer-term commodity price outlook.
  • 3Reduction in funding for natural gas-related upstream opportunities, including Appalachia shale and Kitimat LNG.
  • 4Strategic alternatives, including divestment, are being evaluated for affected natural gas assets.
  • 5Revised oil price outlook contributed to an impairment at the Big Foot project.
  • 6Impairments are not expected to result in material future cash expenditures.
  • 7These actions reflect a disciplined approach to capital allocation.

Frequently Asked Questions

The primary reason is a downward revision in Chevron's longer-term commodity price outlook, particularly for natural gas, which has led the company to re-evaluate the value of certain assets and projects.

The largest portion of the impairment relates to Chevron's natural gas-related upstream opportunities, notably the Appalachia shale assets. Other affected areas include Kitimat LNG and other international projects, as well as the Big Foot project due to revised oil price assumptions.

No, Chevron explicitly states that these are non-cash impairment charges and are not expected to result in any material future cash expenditures. This means the charges reduce the book value of the assets but do not immediately impact the company's cash position.

Chevron is reducing funding to these natural gas-related upstream opportunities and is actively evaluating its strategic alternatives, which include the potential divestment of these assets.