Chevron posts fourth-quarter loss on weak refining, deal charges

HOUSTON • U.S. oil major Chevron Corp. on Friday swung to a surprise US$11-million fourth-quarter loss as low margins on fuel, acquisition costs and foreign currency effects overwhelmed improved drilling results.

Oil companies are expected to benefit from a rebound in oil and gas prices after a one-two punch of falling demand and prices put the industry in a tailspin last year. But as Chevron's final quarter of 2020 showed, pandemic-related travel restrictions continue to hammer fuel demand.

“We expect only a gradual recovery in the global economy,” said Chevron CEO Michael Wirth in a call with analysts. Its oil production this year will be flat to slightly higher on lower spending. Refining operations that generated losses in the fourth quarter should improve, he said.

The firm reported a US$5.54-billion full-year loss, its first since 2016, compared with earnings of US$2.92 billion in 2019.

Chevron was quick to respond to the downturn last year, cutting up to 15 per cent of its workforce, slashing new project outlays by more than a third, and pulling back on oil production goals. It used a relatively strong financial position to acquire Noble Energy for about US$13 billion including debt.

U.S. President Joe Biden this week suspended oil and gas leasing on federal lands. Wirth said that if the policies become onerous, “We've got other places where we can take those dollars.”

The company is developing lower carbon technologies alongside new fossil fuel projects, he said, while cautioning a broad shift to renewable energy will take longer than some expect.

A dozen big oil producers got a jolt last week after debt rating firm S&P Global Ratings put them on watch for potential downgrades over profit challenges from renewables and lower oil prices.

The company's “track record speaks for itself,” chief financial officer Pierre Breber told analysts.

Chevron is investing in carbon capture and storage and hydrogen projects, Wirth said, noting it will focus on new areas where it feels it has a competitive advantage.