As per Chevron the oils and natural gasses long-term prices make some projects lose value. It is due to this that a write-down of $10 Billion assets got agreed. This decrease will be below long-term prices and will reduce assets (oil and natural gas) value. Write-down has around half the value of Appalachia operations, concerned to gas drilling.
In the 4th quarter, there was a write-down between $10 Billion – $11 Billion. It’s said to pose some underscored challenges due to production rise and its effects. The rising production is causing prevent an increase in the price of energy. Even when there exists high global demand there is no right value received.
A reduction in investment made on Appalachian shale will occur. The reduction will be also in British Columbia liquified gas terminal. Even other projects on an international level will suffer the consequences.
A California-based company named San Ramon has disclosed the charge estimate. It announced the spending for next year at $20 Billion.
Chevron, on the other hand, will focus on other operations. The Permian Basin of West Texas and New Mexico will be its part. Even some big projects like one in Kazakhstan. Opportunities are also there at the Gulf of Mexico for deepwater drilling. This makes Chevron invest at such assets. It might be tough choices but will deliver better returns to shareholders, long-term. Concerned on the same, before such announcements made, the shares of Chevron had a rise.
Chevron including other oil companies like Exxon Mobil is under pressure. They will have to measure their policies. These measures will include cutting carbon emissions. This will show a big effect on business. Policies like,
Hydraulic fracturing, horizontal Drilling at U.S. Shale fields have shown production boost. There was also a price undercut. This is there even when there are attempts for output limit by OPEC and other allies.
Other companies like Repsol from Spain also had 4.8 Billion Euros write-down. Either way, it’s not the right time for Oil and Gas companies around.