Chevron Posts Loss, Readies More Layoffs
January 30 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 1/30/16)
By Bradley Olson and Erin Ailworth
Chevron Corp. is readying a second wave of layoffs and slashing
its capital spending by more than $9 billion this year, the oil
company said Friday as it reported a surprise fourth-quarter loss
of more than half a billion dollars.
The company's first failure to turn a quarterly profit since
2002 is a sign of the deepening challenge for U.S. energy producers
as oil and gas prices languish at their lowest levels in more than
a decade. Chevron's full-year 2015 profit of $4.6 billion marks the
lowest annual total in 13 years.
Chevron late last year said it would reduce its employee count
by about 10%. To achieve that cut, 3,200 workers were let go in
2015 and another 4,000 layoffs are coming this year, Chief
Executive John Watson said on Friday.
The energy company's U.S. oil-and-gas-pumping business lost
nearly $2 billion in the last three months of 2015, mostly because
of write-downs. Chevron is the first big energy company to report
its financials for the quarter, and its results suggest that other
drillers will post losses extending into the tens of billions of
dollars.
To contend with low commodity prices and help finance dividend
payments to shareholders, Chevron plans to sell up to $10 billion
in oil fields and other assets through 2017. It also expects to
dial back spending on drilling and other capital expenditures
significantly. A $26.6 billion spending plan detailed in December
will have to be reduced given how much oil-market conditions have
since deteriorated, Mr. Watson told analysts and investors on a
call to discuss fourth-quarter results.
"We're tightly scrutinizing what we're spending right now," he
said.
Shares rose 0.6% to $86.47 on Friday, as oil continued a
weeklong rally amid hopes that Russia and the Organization of the
Petroleum Exporting Countries would agree on a deal to curb
production, which would potentially lift prices.
"Nobody breaks even at $30 oil," said Fadel Gheit, an energy
analyst at Oppenheimer & Co. "With Chevron and everybody else,
there will have to be more cuts that go even deeper. It's not
welcome news for investors."
The U.S. benchmark price for oil settled 40 cents higher at
$33.62 a barrel on Friday.
The three other biggest Western oil companies -- Exxon Mobil
Corp., Royal Dutch Shell PLC and BP PLC -- are all scheduled to
release earnings in the coming week. Combined with Chevron, they
are expected to report annual profits of about $22 billion, the
lowest total in almost two decades, according to S&P Capital
IQ.
Oil companies around the world have been battered by a price
crash that has left crude and natural gas stubbornly low. Producing
countries such as Saudi Arabia and major international oil
companies like Chevron have all continued to pump more fuel in the
face of the crisis -- a standoff that shows no signs of
abating.
Pat Yarrington, Chevron's chief financial officer, said
credit-ratings firms appear to be leaning toward a downgrade of the
oil industry, a step she said would have a broad effect on the
sector.
The second-largest U.S. energy company by revenue behind Exxon,
Chevron boosted output to 2.67 million barrels a day in the fourth
quarter, a 3.4% increase from a year earlier. The company, which is
based in San Ramon, Calif., also managed to replace more than 100%
of its 2015 production, booking oil and gas reserves benefiting
from projects in Australia and West Texas. The company's $54
billion Gorgon natural-gas export development in Australia is set
to begin producing liquefied natural gas in a few weeks.
"The future for Chevron remains really good, although it may not
show in 2016 or 2017, or until prices rebound," said Brian
Youngberg, an energy analyst at Edward Jones in St. Louis. "We're
going to see a very strong recovery in cash flow for Chevron."
That oil-price rebound can only materialize when the current
glut of crude subsides, according to Mr. Watson.
"We believe demand will continue to grow. The larger wild card,
or uncertainty, if you will, is supply," he said, adding that oil
production should fall later this year, lifting prices. "Until that
balance occurs, prices will continue to be constrained and the
financial damage to the energy sector seen in 2015 will
continue."
Chevron reported a loss of $588 million, or 31 cents a share, in
the fourth quarter, down from a profit of $3.47 billion, or $1.85 a
share, in the year-earlier period. Revenue tumbled 37% to $29.25
billion. Analysts were expecting the company to turn a profit, and
had projected 45 cents a share in earnings, according to Thomson
Reuters.
In Chevron's refining division, which turns oil into fuels such
as gasoline and diesel, profits were cut nearly in half, falling to
$496 million.
---
Lisa Beilfuss contributed to this article.
(END) Dow Jones Newswires
January 30, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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