Chevron
said it will have to take a huge impairment charge in its next results of up to $4 billion. Still, the stock was rising early Tuesday.
Impairment charges are an accounting device that companies use to write off the value of assets, usually when they’ve been acquired from other companies.
Chevron
said the charge will fall under special items in its results and won’t be used to figure adjusted earnings.
For Chevron, the charge relates to operations in California and the Gulf of Mexico. Investors may be pleased because they expected a bigger charge, or because they’re happy to get the issues out of the way now as the company tries to close on its $53 billion acquisition of
HessCorp.
The stock may also be reacting to higher crude prices.
Shares of Chevron rose 0.8% to $150.18 in premarket trading. Rival
Exxon
traded up 0.6%, while
BP
was up 0.7%.
Chevron disclosed in a securities filing Tuesday that most of the impairment will be on California assets, thanks to regulatory issues in the state that have resulted in lower anticipated future investment levels, though it plans to continue operating the impacted assets for years ahead.
Part of the charge is also for for Gulf of Mexico fields that it sold to other companies that have since filed for Chapter 11 bankruptcy. By law, that leaves Chevron on the hook for the cost of winding down the operations, a process known as decommissioning.
Chevron said it’s in the midst of determining the financial impacts of the actions. Last year, the company released its fourth-quarter results in late January.
Chevron said Tuesday that the non-cash, after-tax charge will range between $3.5 billion and $4 billion.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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