Chevron will absorb a nearly $11 billion writedown this quarter - and it could weigh on the entire stock market

Associated Press

FILE - In this April 12, 2019, file photo the logos for The Walt Disney Company and Chevron appear above a trading post on the floor of the New York Stock Exchange. The Walt Disney Company reports financial results Wednesday, May 8. (AP Photo/Richard Drew, File)

• Chevron announced Tuesday that it will write down nearly $11 billion in assets in the fourth quarter.
• That could have a $1.32-per-share negative impact on S&P 500 earnings in the fourth quarter, according to Howard Silverblatt of S&P Dow Jones Indices.
• Typically, writedowns are more accounting and have limited cash-flow impacts, Silverblatt said. "It is an admission that they've got an issue and that they're addressing it," Silverblatt told Markets Insider in an interview.
• Watch Chevron trade live on Markets Insider.

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Oil giant Chevron's Tuesday announcement that it will write down nearly $11 billion in assets in the fourth quarter could weigh on the entire market.

A writedown of that size could reduce overall S&P 500 earnings for the quarter by $1.32 per share, depending on how the company decides to record the writedown, according to Howard Silverblatt of S&P Dow Jones Indices.

That's a sizeable amount of earnings. In the fourth quarter, companies in the S&P 500 are expected to earn $40.40 per share, according to S&P Dow Jones data. For the entire year, it is expected that the S&P 500 will earn $158.50 per share, CNBC reported.

Typically, writedowns are more accounting and have limited cash-flow impacts, Silverblatt said. "It is an admission that they've got an issue and that they're addressing it," Silverblatt told Markets Insider in an interview.

Chevron is writing down between $10 billion and $11 billion of assets related to a deepwater Gulf of Mexico project as well as shale gas in Appalachia, both due to low prices of oil and natural gas. It may also sell some natural gas projects to hedge against low prices.

"With capital discipline and a conservative outlook comes the responsibility to make the tough choices necessary to deliver higher cash returns to our shareholders over the long term," Chief Executive Michael Wirth said in a press release.

Shares of Chevron, ranked 24th in the S&P 500, closed down 1.42% Wednesday. The company's stock has gained roughly 7% year-to-date through Wednesday's close.

Markets Insider

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