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NEW YORK: Oil giant Chevron said Tuesday it would take an accounting hit to part of its US assets and recognize some losses, resulting in an impact in its fourth quarter results of up to $4 billion. The impairment of US assets, mainly in California, was “due to continuing regulatory challenges in the state,” while the loss relates to oil and gas production assets earlier sold in the US Gulf of Mexico, said the company in a filing.

The regulatory difficulties resulted in lower anticipated future investment levels in its business plans, Chevron said. But it expects to keep running the assets for “many years to come.” Meanwhile, the loss involves “abandonment and decommissioning obligations,” after companies that bought the production assets filed for protection under Chapter 11 of the US Bankruptcy Code.

The decommissioning activities are to take place over the coming decade. “We believe it is now probable and estimable that a portion of these obligations will revert to the Company,” Chevron said. The actions are, in total, estimated to result in charges of $3.5 billion to $4.0 billion in Chevron’s fourth quarter 2023 results. It expects to treat the financial impacts as special items, excluding them from adjusted earnings. Chevron shares rose 0.4 percent in early trading on Tuesday.

Last October, Chevron and ExxonMobil reported lower profits in quarterly results compared with the year-ago period—even though the figures remained big. Chevron scored profits of $6.5 billion, 42 percent lower than the same period a year prior. The lower profits reflected an ebbing in commodity prices, which had soared after Russia’s invasion of Ukraine. While the petroleum heavyweights in recent times also unveiled major takeovers of midsized fossil fuel players, there are signs of some challenges ahead. In October ExxonMobil said it was buying out rival Pioneer Natural Resources for some $60 billion, in a bid to strengthen position in the coveted Permian Basin.

A few days later Chevron announced the purchase of oil and gas producer Hess for $53 billion. But it is unclear if they can gain quick approval, with Chevron saying in a December filing that the Federal Trade Commission has requested for additional information and materials relating to the merger. The FTC is also reviewing ExxonMobil’s proposed acquisition. Such moves are taken typically when the agency is considering if a merger could be anti-competitive. — AFP

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