Chevron Posts Quarterly Loss to Cap Worst Year Since 2016--Update
January 29 2021 - 9:07AM
Dow Jones News
By Christopher M. Matthews and Dave Sebastian
Chevron Corp. posted its third consecutive quarterly loss Friday
to close its worst year since 2016, as the global pandemic
continues to weigh on the oil-and-gas industry and cloud hopes for
renewed economic growth in 2021.
Chevron is looking to turn the corner on one of the most painful
years in modern history for oil-and-gas companies. For the fourth
quarter, it posted $665 million in losses. For all of 2020, it lost
$5.5 billion as the coronavirus sapped global demand for fossil
fuels. Chevron reported nearly $3 billion in profits in 2019.
"2020 was a year like no other," Chevron Chief Executive Mike
Wirth said. "We were well positioned when the pandemic and economic
crisis hit, and we exited the year with a strong balance
sheet."
Chevron's oil-and-gas-production unit posted $501 million in
profits in the fourth quarter, but the company's results were
weighed down by its refining and chemical businesses, as well as
higher pension expenses and costs related to its $5 billion
acquisition of Noble Energy last year.
Chevron's share price has fallen about 20% over the last year, a
steep decline but better than many of its peers. Investors have
expressed more faith in Chevron than rival Exxon Corp. because it
entered the downturn with a stronger balance sheet. Exxon had about
$69 billion in debt as of September, while Chevron had around $35
billion, according to S&P Capital IQ.
Chevron's stock has been buoyed recently by rising oil prices
climbing about 5% over the last month, as Brent Crude, the global
index, rose more than 8% over the same period.
Oil traders have been shrugging off expanding
coronavirus-related lockdowns in Asia and Europe, anticipating
increased oil and gas demand in 2021 as vaccines are distributed,
according to analyst Rystad Energy. Oil prices have also been
boosted by Saudi Arabia's pledge to cut another one million barrels
a day of oil production in February and March.
Some analysts believe Chevron is poised for a much stronger
year. The company could generate about $12 billion in free cash
flow in 2021 if Brent oil prices are around $50 per barrel,
according to JPMorgan Chase & Co., more than enough to cover
its roughly $10 billion in annual dividend payments
Chevron can now break even if oil is at $46 per barrel, said JP
Morgan, after it made steep spending cuts and reduced its
workforce. Last year, Chevron lowered its 2020 capital expenditures
to $14 billion from $20 billion, and said it would spend between
$14 billion and $16 billion annually through 2025. It had
previously said it could spend as much $22 billion a year over that
period.
Chevron's loss of $665 million in the fourth quarter compared
with a loss of $6.6 billion during the same period in 2019, which
was driven by a roughly $10 billion write-down. The company's
revenues were much higher in the fourth quarter of 2019, at about
$36 billion compared with $25 billion in the last quarter of
2020.
Chevron leaned on its strong balance sheet to complete one the
largest oil and gas deals in 2020, its acquisition of Noble Energy,
which was completed in October.
The company's oil and gas production increased 1% in 2020 from
the previous year to 3.08 million barrels a day, in part, because
Chevron added Noble's output. Morgan Stanley estimates Chevron will
produce nearly 3.3 million barrels a day in 2021.
Write to Christopher M. Matthews at christopher.matthews@wsj.com
and Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
January 29, 2021 08:52 ET (13:52 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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