Falling oil prices push Chevron to first loss since 2002
Chevron suffered its first money-losing quarter since 2002, in the final three months of last year, as plunging crude prices chopped more than one-third from its revenue.
Oil traded this month at levels not seen since 2003, although it has rebounded slightly in the last few days, rising above US$33 per barrel.
Chevron is cutting spending, laying off workers, and looking to sell even more of its assets. The problem with that strategy: It's a buyer's market right now for oil facilities, with too many for-sale signs.
The company has sold off US$11 billion worth of facilities, such as pipelines over the past two years, and hopes to raise up to US$10 billion more with sales through 2017. Company executives say, however, that they won't unload assets at fire-sale prices just to get rid of them.
On a conference call with analysts, Chevron CEO John Watson said he thinks energy demand will grow but that supply is a wild card.
Watson pointed to forecasts that predict increasing cuts in production by non-OPEC nations could restore the market to balance this year. But until that happens, he said, prices will stay low "and the financial damage to the energy sector seen in 2015 will continue."
Watson said Chevron is managing through the downturn by cutting spending and investment it cut fourth-quarter spending by about US$9 billion compared with a year earlier. He said the company will finish projects under construction, but won't start new long-term projects and will be judicious with short-term ones.
San Ramon, California-based Chevron Corp, reported Friday that it lost US$588 million in the fourth quarter. That compares with Chevron's profit of US$3.47 billion in the same quarter a year earlier, when the slump in oil prices was in its early stages.
The loss was concentrated in Chevron's exploration and production business, but even the refining side earned less money due to asset sales.
Revenue plummeted 37 per cent, to US$29.25 billion, although that still beat expectations the average forecast in the FactSet survey was US$27.65 billion.
The company got US$35 for every barrel of oil and other liquids, compared with US$66 a year before. Natural gas prices also fell. Even with falling prices, Chevron boosted production of oil and gas by 3.5 per cent.
For the year, Chevron earned US$4.59 billion, or US$2.45 per share, on revenue of US$138.48 billion. It is the second-largest US oil company behind Exxon Mobil Corp.