Chevron Corp. to Write Down $3.5 Billion to $4 Billion in Assets

Chevron Corp., the multi-national energy corporation, has announced that it will be writing down the value of its assets ranging from $3.5 billion to $4 billion. This decision has been made primarily due to restrictive government regulations in California and environmental liabilities in the Gulf of Mexico.

California, known for having the most stringent clean-fuel standards in the United States, has been implementing policies aimed at phasing out fossil fuels. This shift toward sustainable energy sources has resulted in a drop in Chevron’s production in the state by 15% since the COVID-19 pandemic, now representing only 3% of the company’s global output.

Despite these substantial write-downs, Chevron reassures that it intends to continue operating its oil fields, along with related assets, for years to come. However, the relationship between the corporation and its home state, California, has grown increasingly contentious due to the state’s aggressive environmental policies. In 2023, California initiated legal proceedings against Chevron, among other major oil entities, alleging they have misled the public about the impact of climate change.

In response to the allegations and challenging business climate, Chevron has disputed the state’s climate change claims and reduced investments in refineries. Notably, Chevron is a key supplier of jet fuel to major Californian airports, including San Francisco and Los Angeles.

Additional financial burdens Chevron is facing in the fourth quarter are related to the cleanup costs of decades-old installations in the Gulf of Mexico. These installations have exhausted their productive life span. Although Chevron sold some of these assets, under U.S. law, the responsibility for the cleanup costs falls back on the original owner if the current owner goes bankrupt.

While Chevron did not provide specifics about the affected assets, it mentioned in the filing that it’s “probable” that some environmental costs of previously sold operations will be passed back to them. The corporation anticipates undertaking the decommissioning activities of these assets over the forthcoming decade.

Despite these challenges, Chevron’s shares experienced a mild rise of 0.8% to $150.39 at 11:40 a.m. in New York on Jan. 2.