What Does Chevron’s Future Hold As It Tries To Overcome Its Natural Gas Write Down?

by Trefis Team
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Chevron (NYSE: CVX) is a multinational, oil company based out of San Ramon, California. It is active in over 180 countries and employs over 48,600 people across its operations. The company provides a range of Upstream and Downstream services and competes with Exxon, Royal Dutch Shell, and British Petroleum.

Trefis highlights trends in Chevron’s Revenue over the years, and expects the figure to decline in 2019 due to its sensitivity to commodity prices. While Chevron is expected to increase both its crude and natural gas production for the year, a weak macro environment and the resulting lower prices for these commodities are weighing on the company’s top line. Additionally, Chevron has been forced to write-down $11-billion worth of natural gas assets at a time when oil companies have been picking up smaller natural gas players – indicating of near term headwinds for the industry as a whole.

 

Upstream operations facing adversity from lower commodity prices

Crude:

  • Chevron’s break-even point for it crude stands at $51.
  • Chevron is looking to increase its output of crude output by 5-6% over the next few years if the average price of oil realized remains around $60 a barrel.
  • Production costs have remained flat over the past couple of years. Hence, Chevron may have to reverse its plans of increasing production should average realized price fall to around $55.
  • Chevron continues to develop 2000 new wells in 2020 and is looking to improve its Permian production.
  • Notably, the newer wells and the Permian operations may bring down cost per barrel, which will then allow the company to increase production.

Natural Gas:

  • Natural gas production will go up, but growth of natural gas revenue will remain under pressure unless something substantially changes at the industry level.
  • Chevron is looking to reduce its exposure to natural gas with a global glut and overproduction weighing down prices.

Additional details about trends in Chevron’s Crude Oil and Natural Gas production volumes and realized prices over the years are available in our interactive dashboard.

 

Downstream production to improve on tight supply

  • Downstream production is set to benefit with improved margins pushing up refining production.
  • We expect growth to pick up in 2020.
  • The U.S. and Asia will be the primary source of demand.
  • Chevron’s chemical division, which supplies a range of industries from consumer goods to automobiles through a range of specialty chemicals, will continue to increase moderately over the year.

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