Chevron Chairman and CEO Michael Wirth defended the energy giant’s expected fourth-quarter write-down of up to $11 billion of assets, saying that while “business is good,” it could be better.
“Good isn’t good enough,” Wirth said on CNBC’s “Squawk Box.”
Chevron said on Tuesday it plans to write down the value of its assets by $10 billion to $11 billion in the current quarter, relating to a deepwater Gulf of Mexico project and shale gas in Appalachia. The nation’s second-largest oil company is also considering selling some natural gas projects and may sell shale gas properties.
“We regularly take a look at long-term outlook for commodity markets,” Wirth said. “As we do that, we also look at assets and which will deliver the highest returns on investment for our shareholders.”
Wirth added that the company’s assets in the U.S. Northeast, and some in Canada, “simply don’t compete as well for our investment dollar as others do.”
California-based Chevron has said it plans to hold its 2020 spending program at $20 billion, joining other energy firms in restraining spending after the collapse in oil prices earlier this decade.
Wirth noted that the $20 billion price tag is a hefty cost, but said that it’s been cut in half over the past five years.
“We’ve actually brought our spending down as commodity markets reset — and I like to tell our people, in a commodity business, capital discipline always matters and cost discipline always matters,” he added.
The company plans to spend $4 billion next year in the Permian Basin, the top U.S. oil field in Texas and New Mexico, and another $1 billion on international shale projects. It had planned to spend around $5.2 billion this year.
Chevron will also spend $2.8 billion on its business that refines, transports and markets fuels and petrochemicals, up about $300 million from this year’s budget.
Last month, Chevron, which has been a strong performer among the oil majors, reported a 36% drop in third-quarter profit, hit by lower oil and gas prices and refining margins. It also warned higher costs would affect fourth-quarter results.
— Reuters contributed to this report.