Analyst Note| Allen Good, CFA |
Chevron reported a second-quarter loss of $8.3 billion compared with earnings of $4.3 billion the year before. Included in the second-quarter loss were impairment charges of $1.8 billion from downward revisions to the company’s commodity price outlook and $2.6 billion from the full impairment of its investment in Venezuela due to uncertainty on the outlook of those assets. Excluding the impairments and other special charges, adjusted earnings were a loss of $3.0 billion for the quarter compared with adjusted earnings of $3.4 billion the year before. We plan to incorporate the latest financial results into our model as well as the recently announced Noble acquisition but do not expect a material change to our fair value estimate or narrow moat rating. Unlike its European peers, Chevron did not disclose its internal price deck used to determine the impairments. However, for our valuation purposes it's irrelevant, as we continue to use $60/barrel as our long-term midcycle price assumption.