Chevron swings to large loss on $10 billion in charges, shares sink

© Reuters. An entrance sign at the Chevron refinery, located near the Houston Ship Channel, is seen in Pasadena

By Gary McWilliams

HOUSTON (Reuters) - Chevron Corp (NYSE:CVX) swung to a large fourth-quarter loss on weaker oil and gas prices and $10.4 billion in charges as it stepped up efforts to cull unprofitable assets, and shares of the No. 2 U.S. oil producer tumbled 3% in early trading.

In December, Chevron warned it could take up to $11 billion in writedowns on properties that were no longer economical: Appalachian shale gas properties, a proposed Canadian liquefied natural gas project and a U.S. offshore field.

With oil prices weak, major oil companies including Chevron and Exxon Mobil Corp (NYSE:XOM), have sought to raise cash and improve returns by putting properties on the market.

Chevron shares were off 3% at $107.57 in early trading.

Its production rose in the Permian Basin, the top U.S. shale field, but results were hurt by sharply lower prices for its sales of oil and gas. Average prices for Chevron's oil fell 16% from a year earlier, and natural gas prices fell by nearly half.

Excluding one-time items, per share profit was $1.49, slightly above Wall Street's estimate of $1.45.

Analysts said weaker prices and margins hurt Chevron's cash flow from operations. It fell more than $1 billion from a year ago, to $5.3 billion.

Still, the company generated enough cash for the full year to cover its capital spending and dividends.

"We expect robust cash returns to shareholders to continue," said Edward Jones analyst Jennifer Rowland in a note on Friday.

Chevron's quarterly loss including charges was $6.61 billion, or $3.51 per share, compared with a profit of $3.73 billion, or $1.95 per share, a year earlier.

Results included a gain of $1.2 billion in the quarter on the sale of U.K. North Sea assets.

Chevron's net oil equivalent production was flat at 3.08 million barrels per day in the quarter as gains in its U.S. shale were offset by lower output elsewhere.

Its production in the Permian Basin rose 36% from the year ago quarter, to 514,000 barrels per day.

Charges for shale and other write downs pushed operating profit in its U.S. oil and gas operations to a $7.4 billion loss, compared with a $964 million profit a year ago. Outside the U.S., production profits fell to $731 million from $2.3 billion a year ago.

In refining and chemicals, the company posted a $672 million profit for the quarter, down from $859 million a year ago.