Energy Chevron Corporation (NYSE:CVX): Asset Sales Continue

Chevron Corporation (NYSE:CVX): Asset Sales Continue

Published By Blake Audett at October 14, 2016 11:55 am

With oil prices continuing to extend their declines- from $115 per barrel to $27 per barrel around the beginning of this year, financial profiles of oil and gas giants have mostly shaken up. The continuous mismatch of demand and supply in the energy market with supply growing strong while demand of crude weakening, raises high doubts over any signs of recovery in commodity prices.

Navigating through the price slump with oil prices hovering near $50 per barrel, West Texas Intermediate currently trading at $51.01 per barrel while the Brent crude trading at $52.46 per barrel, many energy firms have been forced to take up austere cost-cutting measures so as to save up their already squeezed profits.

Chevron Corporation (NYSE:CVX), being no exception, is continuously making reductions in its asset profile. According to Bloomberg, citing sources close to the matter, the California-based company is scuttling to put up its natural gas assets in Bangladesh on the auction block. This being said, no final terms over the asset sale have yet been reached, and the company declined to comment on the matter.

At present, Chevron is in discussions with potential buyers over the sale of a stake in the gas fields situated in the South Asian region. The latest sale offer has succeeded to grab the attention of oil producers in India and China.

The asset sale is expected to draw in around $2 billion in disposal proceeds. We believe that the recently announced stake sale would primarily benefit the energy company that has been reporting losses for three-quarters straight. In its second quarter of the fiscal year 2016 (2QFY16), Chevron posted a loss of roughly 1.47 billion, down from net income of $571 million in the same period a year ago. Pushed by the commodity price crash, the oil giant has written down the value of several oil and gas wells.

The asset sale would serve in the best interest of the company bolstering its balance sheet position as well as generating lucrative cash inflows for the company at a time when it is in need of cash. Not just Chevron, but big oil including Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and Exxon Mobil Corporation (NYSE:XOM) are also on a robust pace in laying off their assets to raise cash amid the oil downturn.