Chevron Self-Inflicts Wound In CA; Failed to Plug Low Producing Wells That Yield Only 3 Barrels Of Oil Per Day, Should Blame Itself Not State For 'Impairments', says Consumer Watchdog

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Feb 02, 2024, 14:19 ET

LOS ANGELES, Feb. 2, 2024 /PRNewswire/ -- Consumer Watchdog said that Chevron has itself to blame for its $1.8 billion in "higher US upstream impairment charges mainly in California" discussed in its earnings release today, saying its own low producing wells were the cause.

Chevron's wells only produce an average 3 barrels of oil per day, according to a new analysis by FracTracker. The company had hoped to dump the wells on another buyer, until a new law last year (AB 1167) required any buyer of such wells to prove that they had the financial capacity to plug them.

Consumer Watchdog said Chevron should have long ago plugged its low producing wells and was only keeping them active in order to avoid the cost of plugging them. Chevron's wells have been in decline for many years. According to FracTracker, Chevron wells produced 4.34 barrels of oil per day in 2019, 3.86 in 2020, 3.74 in 2021, and 3.08 in 2022.

In a January filing with the Securities Exchange Commission, Chevron blamed "continuing regulatory challenges in the state that has resulted in lower than anticipated future investment levels its business plans."

"Chevron is wrongfully blaming California for its own negligence in managing its wells," said Jamie Court, president of Consumer Watchdog. "When an oil company is producing only 3 barrels of oil per day from its wells, just enough to fill the tank of 5 Ford F-150s, it's time to shut the wells down. But Chevron knows it will cost more to plug them than to keep them running, despite the pollution they cause and the fact they yield almost no oil. This is a self-inflicted wound by Chevron, not the result of state policies."

"Chevron, like all the oil majors, had counted on dumping these low-producing wells on smalls LLC's destined for bankruptcy, but are now stuck with them," said Kyle Ferrar, Western Program Director at FracTracker Alliance. "Chevron should have been plugging these bad assets over the course of the last four decades. These financial losses are their own doing."

Earnings from refining operations were down from the fourth quarter last year, but still very strong for the year. Chevron's gross refining margin for the West in 2023 was 73 cents per gallon. Its gross refining margin in the West in the 3rd quarter was a whopping $1.05 per gallon. Consumer Watchdog has recommended a maximum gross refining margin in California set at 70 cents after which a price gouging penalty would progressively apply.

"Chevron is still making too much profit from Californians' pain at the pump through its refining operations," said Court. "A price gouging penalty that claws back Chevron's excessive margins is long overdue. California needs to put its foot to the gas to protect drivers with a price gouging penalty before price gouging season hits this summer and fall."

SOURCE Consumer Watchdog