Oil Giant Chevron's Golden State Setback: To Incur Up To $4B Charge in Q4 Over California Challenges

Oil major Chevron Corporation CVX will be impairing a portion of its U.S. upstream assets, primarily in California, in the fourth quarter of FY23.

This is due to continuing regulatory challenges in the state that have resulted in lower anticipated future investment levels in the company’s business plans. 

However, Chevron expects to continue operating the impacted assets for many years to come.

Also, the company will be incurring a loss related to abandonment and decommissioning obligations from previously sold oil and gas production assets in the U.S. Gulf of Mexico.

Since the companies that purchased the above mentioned assets have filed for protection under Chapter 11 of the U.S. Bankruptcy Code, Chevron believes it is now probable that a portion of these obligations will revert to the company. 

Chevron expects to overtake the decommissioning activities on these assets over the next decade.

All the above actions are currently estimated to result in non-cash, after-tax charges of $3.5 billion to $4.0 billion in the company’s fourth quarter 2023 results.

In early December 2023, the company announced an organic capital expenditure (capex) budget of $16 billion for 2024.

The spend includes $14 billion for upstream spending, two-thirds of which is allocated to the U.S.

Price Action: CVX shares are trading higher by 0.76% at $150.30 in premarket on the last check Tuesday.

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