Despite impairing its US$2.6-billion investment in Venezuela due to uncertainty associated with the current operating environment and overall outlook, American-owned energy company Chevron Corporation said it will still continue operations in the South American country.
The write-down comes months after the United States imposed several international sanctions on the country’s socialist Government led by Nicolas Maduro, the most recent coming at the end of April, and limited Chevron’s operations there.
According to oilprice.com, the US Government has granted Chevron a series of three-month sanction waivers to continue operating in Venezuela since it started to increase pressure on Maduro’s regime at the beginning of 2019. However, Chevron’s last extension for its Venezuela operations expired on April 22 and, on that date, the Trump Administration told Chevron it had to start winding down operations in Venezuela by the beginning of December 2020.
“The current operating environment and overall outlook create significant uncertainties regarding recoverability of the company’s investments, leading to a full impairment.”— Chevron
At that time, Chevron Chief Executive Officer Michael Wirth told CNBC, “We intend to comply, obviously, with the requirements of the Government, but we’re not actually winding down or leaving the country.”
“We’re winding down certain activities,” he clarified, before adding: “We don’t actually operate any assets in Venezuela; we are partner in two operations that are operated by another company.”
Notwithstanding, the company still has a licence to operate in Venezuela until December 2020, though with limited capabilities With the licence, Chevron operates a joint venture with Venezuela’s PDVSA, Petroboscan, from which it procured 34,000 barrels per day (bpd) up to October last year.
Yet, despite the output of Petroboscan dropping by more than 50 per cent — from 120,000 bpd in January to 50,000 bpd in March — the American oil giant is resolute to remain in Venezuela, which has the world’s largest reservoir.
“We intend to maintain a presence in the country and resume full operations there one day,” Chevron Corp Chief Financial Officer Pierre Breber said in an earnings call on July 31.
For the second quarter of 2020, which ended June 30, 2020, the company reported a loss of US$8.3 billion, compared to a profit of US$4.3 billion in the same period in 2019.
In response to this outcome, Chevron revealed that it has taken steps to adjust to current realities. Among them, it has revised its commodity price outlook, reduced its capital budget and, as a result, is on track to meet reduced expenditure targets.
Even so, in a release attached to the second-quarter statements, the company outlined: “Chevron remains committed to its people, assets and operations in Venezuela. The current operating environment and overall outlook create significant uncertainties regarding recoverability of the company’s investments, leading to a full impairment.
“Chevron will continue to fulfill its contractual obligations as permitted under the current sanctions and general license, with the intent to return to normal operations in due course,” the release continued.