Chevron profit plummets after writedown of oil asset values

CHICAGO (Bloomberg) -- Chevron Corp. posted its lowest profit in more than 12 years after an energy market rout prompted the company to write down the value of oil and gas fields by almost $2 billion.

Net income during the second quarter fell to $571 million, or 30 cents a share, from $5.67 billion, or $2.98, a year earlier, San Ramon, California-based Chevron said in a statement on Friday. The per-share result was well below the $1.16 average of 20 analysts’ estimates compiled by Bloomberg.

Chevron’s biggest business unit -- oil and gas production - - posted a loss as the second-largest U.S. energy company recorded a $1.96 billion writedown on assets and another $670 million charge for taxes and projects suspended because they no longer make economic sense.

Asset sales generated $1.8 billion during the April-to-June period, part of Chairman and CEO John Watson’s plan to unload $15 billion in lower-profit assets.

Chevron said the ongoing market slump convinced it to lower its long-term outlook for crude prices, though it didn’t provide precise figures. Brent crude, the benchmark for most international oil sales, lost 42% of its value compared to the second-quarter of 2014 amid a war of attrition between U.S. shale drillers and OPEC.

Chevron shares fell 1.9% to $91.26 in New York. Before today, the stock had declined 17% for the year.

Job Cuts

As the oil market rout deepened this year, Watson has cut staff, halted share buybacks and quit shale exploration in Poland and Australia. The company said Tuesday it’s eliminating 1,500 jobs, or about 2.3% of its global staff, to curb spending by about $1 billion.

Watson’s goal is to shield the company’s 4.6% dividend yield from declining cash flow, even as he seeks to add enough new wells to lift the company’s overall output by 20% by the end of 2017.

Chevron is set to outspend bigger rival Exxon this year by at least $1 billion as mega-projects including the $54 billion Gorgon gas-export development in Australia near completion.

Every $1 change in Brent prices adds or subtracts $325 million to $350 million to Chevron’s cash flow. The company is more sensitive to crude fluctuations than its largest U.S. competitors because 67% of Chevron’s output is oil, compared to 54% at Exxon and 48% at ConocoPhillips.