CVX Chevron Corporation

By Christopher M. Matthews and Dave Sebastian 

Chevron Corp. posted its third consecutive quarterly loss Friday to close its worst year since 2016, as the global pandemic continues to weigh on the oil-and-gas industry and cloud hopes for renewed economic growth in 2021.

Chevron is looking to turn the corner on one of the most painful years in modern history for oil-and-gas companies. For the fourth quarter, it posted $665 million in losses. For all of 2020, it lost $5.5 billion as the coronavirus sapped global demand for fossil fuels. Chevron reported nearly $3 billion in profits in 2019.

"2020 was a year like no other," Chevron Chief Executive Mike Wirth said. "We were well positioned when the pandemic and economic crisis hit, and we exited the year with a strong balance sheet."

Chevron's oil-and-gas-production unit posted $501 million in profits in the fourth quarter, but the company's results were weighed down by its refining and chemical businesses, as well as higher pension expenses and costs related to its $5 billion acquisition of Noble Energy last year.

Chevron's share price has fallen about 20% over the last year, a steep decline but better than many of its peers. Investors have expressed more faith in Chevron than rival Exxon Corp. because it entered the downturn with a stronger balance sheet. Exxon had about $69 billion in debt as of September, while Chevron had around $35 billion, according to S&P Capital IQ.

Chevron's stock has been buoyed recently by rising oil prices climbing about 5% over the last month, as Brent Crude, the global index, rose more than 8% over the same period.

Oil traders have been shrugging off expanding coronavirus-related lockdowns in Asia and Europe, anticipating increased oil and gas demand in 2021 as vaccines are distributed, according to analyst Rystad Energy. Oil prices have also been boosted by Saudi Arabia's pledge to cut another one million barrels a day of oil production in February and March.

Some analysts believe Chevron is poised for a much stronger year. The company could generate about $12 billion in free cash flow in 2021 if Brent oil prices are around $50 per barrel, according to JPMorgan Chase & Co., more than enough to cover its roughly $10 billion in annual dividend payments

Chevron can now break even if oil is at $46 per barrel, said JP Morgan, after it made steep spending cuts and reduced its workforce. Last year, Chevron lowered its 2020 capital expenditures to $14 billion from $20 billion, and said it would spend between $14 billion and $16 billion annually through 2025. It had previously said it could spend as much $22 billion a year over that period.

Chevron's loss of $665 million in the fourth quarter compared with a loss of $6.6 billion during the same period in 2019, which was driven by a roughly $10 billion write-down. The company's revenues were much higher in the fourth quarter of 2019, at about $36 billion compared with $25 billion in the last quarter of 2020.

Chevron leaned on its strong balance sheet to complete one the largest oil and gas deals in 2020, its acquisition of Noble Energy, which was completed in October.

The company's oil and gas production increased 1% in 2020 from the previous year to 3.08 million barrels a day, in part, because Chevron added Noble's output. Morgan Stanley estimates Chevron will produce nearly 3.3 million barrels a day in 2021.

Write to Christopher M. Matthews at christopher.matthews@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

(END) Dow Jones Newswires

January 29, 2021 08:52 ET (13:52 GMT)

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