Chevron said that it will cut funding to its Appalachia shale operations in the US and also the CAD40bn ($30.23bn) Kitimat LNG project and other gas-related international projects.
Furthermore, the US oil and gas company is exploring strategic alternatives for the gas assets, including their sale.
The company expects to take $10bn-$11bn after-tax impairment charges in its fourth quarter 2019 results owing to the actions on its gas assets. Also included in the impairment charges is the Big Foot project in the US Gulf of Mexico due to a revised oil price outlook.
The oil and gas producer said that more than half of the impairment charges are associated with its Appalachia shale operations.
The company revealed its decisions during the announcement of a $20bn organic capital and exploratory spending programme for 2020. In December 2018 as well, the oil and gas firm announced a $20bn budget for 2019.
Details of Chevron 2020 budget
Chevron 2020 budget is said to support a portfolio of upstream and downstream investments, which includes its operations in the Permian Basin and a queue of deepwater projects in the Gulf of Mexico.
The oil industry company will also allocate a part of its budget on Tengizchevroil, which operates the Tengiz Field and Korolev Field in Kazakhstan. The company has a 50% stake in Tengizchevroil, and is partnered by KazMunayGas, ExxonMobil Kazakhstan, and LukArco.
For its upstream operations, Chevron expects to invest around $11bn to sustain and grow its existing producing assets, which includes nearly $4bn for unconventional development in the Permian Basin and approximately $1bn for other international unconventional development projects.
The oil and gas producer will allocate nearly $5bn in major capital projects that are currently in progress, of which about 75% will be pertained to the Future Growth Project and Wellhead Pressure Management Project (FGP / WPMP) at the Tengiz Field.
Chevron 2020 budget has about $1bn to cover the company’s global exploration activities.
For its downstream operations, the US energy company will spend nearly $2.8bn. In the US, the company’s downstream investment will be $1.6bn with the remaining $1.2bn to be used for investment in downstream projects outside the country.
Chevron chairman and CEO Michael Wirth said: “We are positioning Chevron to win in any environment by ratably investing in the highest return, lowest risk projects in our portfolio.
“This will be the third consecutive year with organic capital spending held flat at $20 billion, continuing our capital discipline through the cycle. Our emphasis on short cycle investments is expected to deliver improved returns on capital and stronger free cash flow over the long-term.”
