Chevron Reports Q2 Loss of $8.3bn on Venezuela Impairment
US major Chevron said July 31 it has “fully impaired” its $2.6bn investment in Venezuela, leading to a Q2 2020 net loss of $8.3bn, compared to earnings of $4.3bn in the same period last year.
“Chevron remains committed to its people, assets and operations in Venezuela,” the company said in reporting its Q2 results. “Chevron will continue to fulfill its contractual obligations as permitted under the current sanctions and general license, with the intent to return to normal operations in due course.”
Besides the Venezuelan impairment, taken “due to uncertainty associated with the current operating environment and overall outlook”, Chevron reported a $1.8bn impairment related primarily to a downward revision of its commodity price outlook, severance accruals amounting to $780mn and a $437mn foreign currency exchange loss. These were partially offset by a $310mn gain on the sale of Azerbaijan assets.
Without the impairments and other special charges, the Q2 2020 adjusted loss was $3bn, compared with adjusted earnings in Q2 2019 of $3.4bn.
“The past few months have presented unique challenges,” Chevron CEO Michael Wirth said. “The economic impact of the response to Covid-19 significantly reduced demand for our products and lowered commodity prices. Given the uncertainties associated with economic recovery, and ample oil and gas supplies, we made a downward revision to our commodity price outlook which resulted in asset impairments and other charges.”
Although demand and commodity prices have shown some signs of recovery since the second quarter, they have not yet returned to pre-pandemic levels, Chevron said, and financial results may continue depressed into the third quarter.
Chevron reduced its capital budget in response to the current environment, and the company is on track with its commitment to reduce operating expenses, Wirth said. Q2 organic capital expenditures were $3bn, 40% below the quarterly budget, and year-to-date expenditures are on track with the company’s revised full-year guidance of $14bn.
Global oil-equivalent production in the second quarter averaged just under 3mn b/d, down 3% from a year ago and 8% lower than Q1 2020. Net natural gas production slipped to just under 7bn ft3/day from 7.4bn ft3/day in Q2 2019, reflecting increased US production more than offset by lower international output.