Ouch ... Chevron Talking $11 Billion Writedown Amid Weak Prices Of Gas

Chevron Corporation(CVX)  has expected to write down as much as $11 billion in the fourth quarter of the year, which is more than half of its Appalachia natural gas assets. The move comes amid long-term declines in oil prices as well as more recent declines in natural gas prices both of which have impacted energy producers including Chevron, which despite the challenges has been among the strongest performers among the big U.S. oil majors.

Chevron Corporation is an American multinational energy corporation. It is one of the successor companies of Standard Oil and it is headquartered in San Ramon, California, and active in more than 180 countries. Chevron is engaged in every aspect of the oil, natural gas and geothermal energy industries, including hydrocarbon exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. Chevron is one of the world's largest oil companies; as of 2019, it ranked eleventh in the Fortune 500 list of the top US closely held and public corporations and 28th on the Fortune Global 500 list of the top 500 corporations worldwide. Chevron's downstream operations manufacture and sell products such as fuels, lubricants, additives and petrochemicals.

As contained in a statement on Tuesday, the U.S. oil major is considering the sale of its shale-gas holdings, along with its Kitimat liquefied natural gas project in Canada. The company said it will keep its 2020 capital budget at $20 billion, the third consecutive year it has not boosted spending.

The corporation is headed by Chief Executive Officer, Mike Wirth, whose strategy has been capital discipline. Earlier this year, Wirth earned about $1 billion for the company by walking away from a bidding war for Anadarko Petroleum Corp. San Ramon. California-based Chevron is the best performer among the five Western oil majors in 2019, but it has faced mounting costs at its Tengiz project in Kazakhstan.

In the statement, Wirth said, “The best use of our capital is investing in our most advantaged assets. With capital discipline and a conservative outlook comes the responsibility to make the tough choices necessary to deliver higher cash returns to our shareholders over the long term.”

Prices of U.S. natural gas futures  have declined this year amid a supply glut, and are now averaging about $2.54 per million British thermal units. It will be the lowest average price since 1999 if it finishes the year at that level.

Chevron Corp. says it plans to spend $4 billion in 2020 at the Permian Basin, the top U.S. oil field in Texas and New Mexico, and another $1 billion on international shale projects. It had planned to spend around $5.2 billion this year. It will also spend $2.8 billion on its business that refines, transports and markets fuels and petrochemicals, which is up to about $300 million from this year’s budget.

Currently, the shares of Chevron Corp. has traded lower following the news of the $11 billion write-down.