Chevron Corp.
CLC -2.08%.
posted its third consecutive quarterly loss on Friday, ending its worst year since 2016. The global pandemic continues to put pressure on the oil and gas industry, diminishing hopes for a resumption of economic growth in 2021.
Chevron is trying to reverse one of the most painful years in recent history for oil and gas companies. A loss of $665 million was reported for the fourth quarter. For the year 2020 as a whole, it lost $5.5 billion as the coronavirus increased global demand for fossil fuels. Chevron has announced a profit of nearly $3 billion for 2019.
We have proven that we can get through a year like any other and come out stronger, executive director Chevron said.
Mike Wirth.
said in the interview. We now have to get through this pandemic and see what the true state of the world economy is, and I think it will be uneven.
Corporate Pandemic Profit
Chevron’s oil and gas production division earned $501 million in the fourth quarter, but the company’s profit was affected by its refining and chemical operations, as well as higher costs and pension expenses related to last year’s $5 billion acquisition of Noble Energy.
Chevron’s share price fell about 20% last year, which is a sharp drop, but better than many of its sector peers. Investors were more confident in Chevron than in a competitor.
Exxon Corp.
because he went into the recession with a stronger balance sheet. Exxon had debt of about $69 billion in September, while Chevron had debt of about $35 billion, according to S&P Capital IQ.
Oil prices have risen about 5% in the past month, while the global Brent crude index has risen more than 8% in the same period.
Oil traders have brushed aside the growing number of coronavirus-related sites in Asia and Europe and expect demand for oil and gas to increase in 2021 as vaccines become more widely available, according to analyst Rystad Energy. Oil prices also rose thanks to Saudi Arabia’s pledge to cut its oil production by a million barrels a day in February and March.
Some analysts believe Chevron is gearing up for a much stronger year. The company could generate about $12 billion in free cash flow in 2021 if the price of Brent is around $50 a barrel, according to
JPMorgan Chase.
more than enough to cover the annual dividend payment of about $10 billion.
Chevron could break even now if oil costs $46 a barrel, JPMorgan said, after the company cut costs and staff in 2020. Last year, Chevron lowered its capital spending from $20 billion to $14 billion by 2020 and said it would spend $14 billion to $16 billion annually by 2025. Earlier, she had said she could spend up to $22 billion a year during that period.
Chevron’s fourth quarter loss was $665 million, compared to a loss of $6.6 billion in the same period in 2019 due to an impairment charge of approximately $10 billion. The company’s fourth quarter 2019 revenue of approximately $36 billion is significantly higher than the last quarter 2020 revenue of $25 billion.
Chevron, building on its strong balance sheet, closed one of its largest oil and gas transactions of 2020, the acquisition of Noble Energy, which was completed in October.
Oil and gas production in 2020 increased 1% from the previous year to 3.08 million barrels per day, in part because Chevron Noble ramped up production.
Morgan Stanley.
It is estimated that Chevron will produce nearly 3.3 million barrels per day by 2021.
Despite some optimism about the sector’s recovery in the coming year, long-term questions about the future profitability of oil and gas companies remain unanswered. Earlier this week, S&P Global Ratings warned that it would downgrade the ratings of Chevron and many other major oil companies, saying the sector is increasingly threatened by the transition to a low-carbon economy due to climate change concerns. Such a downgrade in credit rating may result in higher financing costs for the industry, making it more difficult to finance large projects.
On Wednesday, President Biden issued an executive order to temporarily suspend new oil and gas concessions on federal lands, signaling a tightening of the outlook for U.S. policy in this sector, analysts said. According to Morgan Stanley, about 25% of US oil production is tied up in federal land and water, and Chevron has a strong presence in both areas.
Wirth said the world is in transition to a low-carbon energy system and Chevron’s strategy is to simultaneously reduce its carbon footprint and generate higher revenues. He said he supports President Biden’s efforts to reduce carbon emissions, but noted that some of the executive orders are broad and could create obstacles to responsible energy development.
The current energy system is not the enemy, Wirth said. It’s the broadcasts we need to focus on.
Email Christopher M. Matthews at [email protected] and Dave Sebastian at [email protected].
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