US supermajor Chevron reported its first loss since the third quarter of 2002 on Friday morning, as the oil price plunge has forced it to write down the value of its O&G fields.
In October, the company said in a budget commentary that it may be spending only half of 2014 capital expenditure levels by 2018, which would be a massive $20 billion reduction in annual investment spending in just four years. And in August, the company announced it was eliminating 1,500 permanent positions.
In today’s earnings report, the company offered more specificity as to its short-term plans given its recent results and in the context of the depressed oil market environment.
First Loss Since 3Q02
The company reported a 4Q15 net loss of $588 million ($0.31 per share) versus a $3.5 billion ($1.85) profit a year earlier. Full-year 2015 earnings were $4.6 billion ($2.45) versus $19.2 billion ($10.14) in 2014.
Source: Chevron 4Q15 report
“Our 2015 earnings were down significantly from the previous year, reflecting a nearly 50 percent year-on-year decline in crude oil prices,” Chevron CEO John Watson said in the statement.
Chevron said its 4Q output increased by 3.5% to 2.67 million boepd. Chevron’s global production is around 66% oil, with the remainder being natural gas and gas byproducts.
Upstream & Downstream Profits Both Fall
Unsurprisingly, most of the company’s losses came from its upstream divisions, with its US upstream segment reporting a $1.95 billion loss. Surprisingly, the company’s refining segment also saw a plunge in profits. Chevron said the fall was because of an uptick from the prior year in asset sales, as well as smaller margins on some refined products.
Chevron CEO John Watson
Chevron’s 4Q earnings include impairments and other charges of $1.1 billion, the company said. The impact of low oil prices eliminated any upside from the 3.5% rise in production in 4Q. “Production increases due to project ramp-ups in the Gulf of Mexico and the Permian Basin in Texas and New Mexico were partially offset by normal field declines and the effect of asset sales,” the company said.
Chevron said it discovered enough new O&G to replace 107% of what it produced last year.
“Taking Significant Action…”
Watson said, “We’re taking significant action to improve earnings and cash flow in this low price environment.”
Last month, Chevron announced it was cutting its 2016 Capex by 24% to $26.6 billion. On Friday, Watson said, “Operating expenses and capital spending were reduced $9 billion in 2015 from 2014, and I expect similarly large reductions again in 2016. In addition, asset sales proceeds were $6 billion in 2015, with additional sales planned for 2016 and 2017.”