Correspondence 0000093410-24-000043 from CHEVRON CORP (CVX) (CIK 0000093410) (CVX)
CHEVRON CORP (CVX) (CIK 0000093410)
Date: Aug. 7, 2024 · CIK: 0000093410 · Accession: 0000093410-24-000043
AI Filing Summary & Sentiment
File numbers found in text: 001-00368
Referenced dates: July 24, 2024
Letter
Via EDGAR Division of Corporation Finance Re: Chevron Corporation Form 10-K for Fiscal Year ended December 31, 2023 (“2023 Form 10-K”) Filed February 26, 2024 File No. 001-00368
Dear Ms. Moosariparambil:
In your letter dated July 24, 2024, you provided comments from the review of Chevron Corporation’s (“Chevron” or “the Company”) 2023 Form 10-K by the staff (“Staff”) of the U.S. Securities and Exchange Commission (“SEC”). These comments and the Company’s responses are set forth below.
As used in this response letter, the term “Chevron” and the “Company” may refer to Chevron Corporation or one or more of its consolidated subsidiaries.
Form 10-K for Fiscal Year Ended December 31, 2023
Item 15. Exhibit and Financial Statement Schedules
Notes to the Consolidated Financial Statements
Note 24 – Other Contingencies and Commitments, page 97
1.We note in the fourth quarter 2023, you recognized an after-tax loss of $1.9 billion related to abandonment and decommissioning obligations from previously sold oil and gas production assets in the U.S. Gulf of Mexico, as companies that purchased these assets have filed for protection under Chapter 11 of the U.S.
Chevron Corporation
5001 Executive Parkway, Suite 200, San Ramon, CA 94583-5006
Tel 925 842 1000
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 2
Bankruptcy Code. You disclose it is now probable and estimable that a portion of these obligations will revert to the company and the cash outlays for these abandonment and decommissioning obligations are expected to take place over the next decade. Please address the following:
Company Response:
The Company has set forth the Staff’s bulleted comments below and addresses each one individually.
Executive Summary:
As detailed in the response below, substantially all of the $1.9 billion loss that was recognized during the fourth quarter of 2023 related to the bankruptcies of Cox Operating, LLC (“Cox”) and Fieldwood Energy LLC (“Fieldwood”), with approximately 80 percent attributable to Cox. During the periods leading up to the fourth quarter of 2023, significant uncertainty existed as to whether, when and to what extent decommissioning obligations previously assumed by Cox and Fieldwood could revert to Chevron. When Cox declared bankruptcy in May 2023, multiple commercial alternatives other than the reversion of such obligations to Chevron were possible under the U.S. Bankruptcy Code, including potential sales of assets to third parties and the fact that numerous Cox assets were generating revenues through production of oil and natural gas. Chevron did not know which assets would be sold by Cox and which decommissioning obligations previously assumed by Cox would ultimately revert to Chevron. The Company also considered the asset retirement obligation balance derecognized in connection with the 2015 sale. As a result, in the second and third quarters of 2023, Chevron deemed the liability with respect to Cox-related decommissioning obligations as reasonably possible but not probable and estimable, and did not expect the amount could result in a material loss.
In December 2023, a subset of producible leases from the Cox Debtors’ estate was sold to a third party, but in a lesser amount than the Company had anticipated, potentially indicating more decommissioning obligations than anticipated reverting to the Company. Also, in December 2023, Cox and affiliated debtors sought court approval to abandon (i.e., relinquish from the debtors’ estate) certain properties and to reject associated leases/agreements that were a burden to the debtors’ estate (“Motion to Abandon”), including producible leases where Chevron was in the chain of title. As a result of this new information, Chevron then determined that it was probable that decommissioning obligations from leases within the Cox Debtors’ estate would revert to the Company due to its status as a predecessor in interest to the debtors and concluded that it had sufficient information to determine the potential loss related to the Cox assets was both probable and reasonably estimable. At that time, in accordance with ASC 450, the Company recorded a liability that represented the best estimate of future costs, given current facts and circumstances around the scope of liability, industry-wide cost estimates, and current attribution of Chevron’s share of the decommissioning costs.
Background Information:
As disclosed in its periodic reports with the SEC, the Company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value and to acquire assets or operations
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 3
complementary to its asset base to help augment the Company’s financial performance and value growth. For asset sales, commercial negotiations dictate whether liabilities related to assets, such as abandonment and decommissioning obligations, are retained by the Company or assumed by the buyer.
Chevron applies ASC 410 to account for asset retirement obligations (“ARO”) when Chevron owns assets. The ARO asset and liability are recorded when there is a legal obligation associated with the retirement of a long-lived asset and the amount can be reasonably estimated. If the asset is sold and the Company retains the decommissioning obligations, the associated decommissioning liabilities remain on the Company’s consolidated balance sheet. If the obligation to decommission the assets is assumed by the buyer, the Company derecognizes the decommissioning obligations from its balance sheet; any further recognition follows ASC 450 and a loss contingency is recorded by Chevron only when a loss is probable and can be reasonably estimated, and disclosure of the contingency is made when the loss is at least reasonably possible and material.
As disclosed in SEC filings, Chevron had total assets that averaged over $250 billion from 2021-2023, and before-tax income that averaged over $33 billion per year over the same period. Chevron considers these financial metrics and other quantitative and qualitative factors when assessing what disclosures are appropriate in its financial statements.
•Explain, in reasonable detail, the facts that resulted in the determination a $1.9 billion loss should be recorded in the fourth quarter 2023. Your explanation should address the assets that were sold, dates of each sale, and events that occurred between the time of sale and when it was determined an accrual should be recorded related to the abandonment and decommissioning obligations from the previously sold assets. Address any terms of your contractual agreements or requirements by government authorities which resulted in a portion of these obligations reverting to the company subsequent to the sale.
Company Response:
Assets on the Outer Continental Shelf in the Gulf of Mexico (“GOM”) are subject to regulatory oversight by the Department of the Interior through the Bureau of Ocean Energy Management (“BOEM”), which oversees ownership and maintenance of leases, including bonding for decommissioning, and the Bureau of Safety and Environmental Enforcement (“BSEE”), which oversees operation of leases, including management of decommissioning and estimation of decommissioning costs. Per federal regulations, all previous lease owners are jointly and severally liable for accrued1 decommissioning obligations. BSEE enforces accrued decommissioning obligations against predecessors in interest by issuance of a Decommissioning Order, which typically occurs after lease owner or operator default. Instances of default by a lease owner or operator can include failure to timely2 perform accrued decommissioning obligations, bankruptcy, lease relinquishment, or an affirmative statement to BSEE that the operator will not complete the required decommissioning.
1 As utilized in this response letter when referencing decommissioning obligations, the term “accrued” has the meaning prescribed in 30 C.F.R. § 250.1702.
2 30 C.F.R. § 250.1710 requires permanent abandonment of all wells on a lease within one year after the lease terminates.
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 4
After regularly selling assets over many years, the Company undertook a significant asset sale program in 2015 and 2016 whereby the Company sold most of its GOM shelf assets (generally 800 feet of water and shallower). Additionally, between 2000 and 2020, Chevron acquired companies that had similarly sold assets prior to acquisition, such as Texaco Corporation (“Texaco”), Unocal Corporation (“Unocal”), and Noble Energy, Inc. (“Noble”). From 2000 to 2018, Chevron, Texaco, Unocal, and Noble each sold assets to Cox and Fieldwood, subsidiaries or affiliates of Cox and Fieldwood, or to other companies that were subsequently purchased by Cox or Fieldwood. Following these sales, Cox and Fieldwood each filed for protection under Chapter 11 of the U.S. Bankruptcy Code, as detailed in the Appendix.
“Decommissioning Orders” are issued by BSEE in the ordinary course of administering regulations and outside of bankruptcy proceedings after decommissioning liability is defaulted upon by debtors. Although the Company’s regulatory liability is not determined or assigned by a bankruptcy court, Chevron monitored the progression of bankruptcy proceedings of both Cox and Fieldwood in order to evaluate whether developments were likely to result in BSEE issuing Decommissioning Orders to Chevron as predecessor in interest in assets then owned and/or operated by the named debtors. During bankruptcy proceedings, both Cox and Fieldwood defaulted on their regulatory decommissioning obligations with respect to assets purchased from the Company. Substantially all of the $1.9 billion loss that was recognized during the fourth quarter 2023 was related to the bankruptcies of Cox and Fieldwood, with approximately 80 percent attributable to Cox.
During the periods leading up to the fourth quarter 2023, significant uncertainty existed as to whether, when and to what extent decommissioning obligations previously assumed by Cox and Fieldwood could revert to Chevron. Multiple commercial outcomes were possible under the U.S. Bankruptcy Code including potential sales of assets (including assets where Chevron was in the chain of title) to third parties, numerous Cox assets were generating revenues through production of oil and natural gas, and Cox had not yet defaulted on its decommissioning obligations. In addition, the Company did not know which leases would be sold by Cox and which decommissioning obligations previously assumed by Cox would ultimately revert to the Company. The Company also considered the asset retirement obligation balance derecognized in connection with the 2015 sale. As a result, in the second and third quarters of 2023, Chevron deemed the liability with respect to Cox-related decommissioning obligations as reasonably possible but not probable and estimable, and did not expect the amount could result in a material loss. The Company provided qualitative disclosure on this possible exposure in the Management’s Discussion and Analysis (“MD&A”) sections of the Company’s second and third quarter 2023 Forms 10-Q.
In December 2023, a subset of producible leases from the bankruptcy estate of the Cox Debtors (as defined in the Appendix) was sold to a third party, but in a lesser amount than the Company had anticipated, potentially indicating more decommissioning obligations than anticipated reverting to the Company. Also, in December 2023, the Cox Debtors filed a Motion to Abandon, including producible leases. As a result of these events, and the related new information, the Company concluded it was now probable that decommissioning obligations from leases within the Cox Debtors’ estate would revert to the Company due to its status as a predecessor in interest to the Cox Debtors. The Company then recorded a liability that represented its best
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 5
estimate of future costs, given current facts and circumstances around the scope, industry-wide cost estimates, and current attribution of Chevron’s share of the decommissioning costs. In future periods, as bankruptcy proceedings progress, the Company will continue to assess its obligations and adjust the liability as necessary and provide disclosures of any losses that may be incremental to what is accrued if the additional loss is reasonably possible and materially different from the amount accrued.
The Appendix outlines the relevant facts as they pertain to substantially all of the liability recognized by the Company in the fourth quarter of 2023.
•Tell us how you considered the application of ASC 450-20-50, Item 103 of Regulation S-K, Item 105 of Regulation S-K and Item 303 of Regulation S-K to those facts in the periods prior to the fourth quarter of 2023. As part of your response, address the requirement to describe any known trends, events or uncertainties that are reasonably likely to have a material impact on your liquidity, capital resources or results of operations.
Company Response:
As previously stated, Chevron applies ASC 450 when assessing loss contingencies related to previously sold assets, with the decommissioning obligations assumed by the buyer. As explained above and detailed in the Appendix, in the second and third quarters of 2023, significant uncertainty existed as to whether, when and to what extent decommissioning obligations previously assumed by Cox and Fieldwood could revert to Chevron, as there were multiple commercial outcomes available under the U.S. Bankruptcy Code, numerous Cox assets were generating revenues through production of oil and natural gas, and Cox had not yet defaulted on its decommissioning obligations. The Company also considered the asset retirement obligation balance derecognized at the time of the 2015 sale. Therefore, Chevron deemed the liability with respect to Cox-related decommissioning obligations as reasonably possible but not probable and estimable, and did not expect the amount could result in a material loss. In December 2023, a subset of producible leases from the Cox Debtors’ estate was sold to a third party, but in a lesser amount than the Company had anticipated, potentially indicating more decommissioning obligations than anticipated reverting to the Company. When the Cox bankruptcy proceedings advanced and the Cox Debtors filed a Motion to Abandon, including producible leases, Chevron determined that it was now probable that Cox would default on its decommissioning obligations and a loss was reasonably estimable, given current facts and circumstances around the scope of liability, industry-wide cost estimates, and current attribution of Chevron’s share of the decommissioning costs. At that time, the Company expanded its disclosure in the 2023 Form 10-K, Note 24 – Other Contingencies and Commitments as follows:
In addition, some assets are sold along with their related liabilities and in certain instances, such transferred obligations have reverted and may in the future revert to the company and result in losses that could be significant. In fourth quarter 2023, the company recognized an after-tax loss of $1,950 related to abandonment and decommissioning obligations from previously sold oil and gas production assets in the
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 6
U.S. Gulf of Mexico, as companies that purchased these assets have filed for protection under Chapter 11
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CORRESP
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filename1.htm
Document
Alana K. Knowles
Vice President and Controller
August 7, 2024
Via EDGAR
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington, D.C. 20549
Re: Chevron Corporation
Form 10-K for Fiscal Year ended December 31, 2023 (“2023 Form 10-K”)
Filed February 26, 2024
File No. 001-00368
Dear Ms. Moosariparambil:
In your letter dated July 24, 2024, you provided comments from the review of Chevron Corporation’s (“Chevron” or “the Company”) 2023 Form 10-K by the staff (“Staff”) of the U.S. Securities and Exchange Commission (“SEC”). These comments and the Company’s responses are set forth below.
As used in this response letter, the term “Chevron” and the “Company” may refer to Chevron Corporation or one or more of its consolidated subsidiaries.
Form 10-K for Fiscal Year Ended December 31, 2023
Item 15. Exhibit and Financial Statement Schedules
Notes to the Consolidated Financial Statements
Note 24 – Other Contingencies and Commitments, page 97
1.We note in the fourth quarter 2023, you recognized an after-tax loss of $1.9 billion related to abandonment and decommissioning obligations from previously sold oil and gas production assets in the U.S. Gulf of Mexico, as companies that purchased these assets have filed for protection under Chapter 11 of the U.S.
Chevron Corporation
5001 Executive Parkway, Suite 200, San Ramon, CA 94583-5006
Tel 925 842 1000
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 2
Bankruptcy Code. You disclose it is now probable and estimable that a portion of these obligations will revert to the company and the cash outlays for these abandonment and decommissioning obligations are expected to take place over the next decade. Please address the following:
Company Response:
The Company has set forth the Staff’s bulleted comments below and addresses each one individually.
Executive Summary:
As detailed in the response below, substantially all of the $1.9 billion loss that was recognized during the fourth quarter of 2023 related to the bankruptcies of Cox Operating, LLC (“Cox”) and Fieldwood Energy LLC (“Fieldwood”), with approximately 80 percent attributable to Cox. During the periods leading up to the fourth quarter of 2023, significant uncertainty existed as to whether, when and to what extent decommissioning obligations previously assumed by Cox and Fieldwood could revert to Chevron. When Cox declared bankruptcy in May 2023, multiple commercial alternatives other than the reversion of such obligations to Chevron were possible under the U.S. Bankruptcy Code, including potential sales of assets to third parties and the fact that numerous Cox assets were generating revenues through production of oil and natural gas. Chevron did not know which assets would be sold by Cox and which decommissioning obligations previously assumed by Cox would ultimately revert to Chevron. The Company also considered the asset retirement obligation balance derecognized in connection with the 2015 sale. As a result, in the second and third quarters of 2023, Chevron deemed the liability with respect to Cox-related decommissioning obligations as reasonably possible but not probable and estimable, and did not expect the amount could result in a material loss.
In December 2023, a subset of producible leases from the Cox Debtors’ estate was sold to a third party, but in a lesser amount than the Company had anticipated, potentially indicating more decommissioning obligations than anticipated reverting to the Company. Also, in December 2023, Cox and affiliated debtors sought court approval to abandon (i.e., relinquish from the debtors’ estate) certain properties and to reject associated leases/agreements that were a burden to the debtors’ estate (“Motion to Abandon”), including producible leases where Chevron was in the chain of title. As a result of this new information, Chevron then determined that it was probable that decommissioning obligations from leases within the Cox Debtors’ estate would revert to the Company due to its status as a predecessor in interest to the debtors and concluded that it had sufficient information to determine the potential loss related to the Cox assets was both probable and reasonably estimable. At that time, in accordance with ASC 450, the Company recorded a liability that represented the best estimate of future costs, given current facts and circumstances around the scope of liability, industry-wide cost estimates, and current attribution of Chevron’s share of the decommissioning costs.
Background Information:
As disclosed in its periodic reports with the SEC, the Company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value and to acquire assets or operations
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 3
complementary to its asset base to help augment the Company’s financial performance and value growth. For asset sales, commercial negotiations dictate whether liabilities related to assets, such as abandonment and decommissioning obligations, are retained by the Company or assumed by the buyer.
Chevron applies ASC 410 to account for asset retirement obligations (“ARO”) when Chevron owns assets. The ARO asset and liability are recorded when there is a legal obligation associated with the retirement of a long-lived asset and the amount can be reasonably estimated. If the asset is sold and the Company retains the decommissioning obligations, the associated decommissioning liabilities remain on the Company’s consolidated balance sheet. If the obligation to decommission the assets is assumed by the buyer, the Company derecognizes the decommissioning obligations from its balance sheet; any further recognition follows ASC 450 and a loss contingency is recorded by Chevron only when a loss is probable and can be reasonably estimated, and disclosure of the contingency is made when the loss is at least reasonably possible and material.
As disclosed in SEC filings, Chevron had total assets that averaged over $250 billion from 2021-2023, and before-tax income that averaged over $33 billion per year over the same period. Chevron considers these financial metrics and other quantitative and qualitative factors when assessing what disclosures are appropriate in its financial statements.
•Explain, in reasonable detail, the facts that resulted in the determination a $1.9 billion loss should be recorded in the fourth quarter 2023. Your explanation should address the assets that were sold, dates of each sale, and events that occurred between the time of sale and when it was determined an accrual should be recorded related to the abandonment and decommissioning obligations from the previously sold assets. Address any terms of your contractual agreements or requirements by government authorities which resulted in a portion of these obligations reverting to the company subsequent to the sale.
Company Response:
Assets on the Outer Continental Shelf in the Gulf of Mexico (“GOM”) are subject to regulatory oversight by the Department of the Interior through the Bureau of Ocean Energy Management (“BOEM”), which oversees ownership and maintenance of leases, including bonding for decommissioning, and the Bureau of Safety and Environmental Enforcement (“BSEE”), which oversees operation of leases, including management of decommissioning and estimation of decommissioning costs. Per federal regulations, all previous lease owners are jointly and severally liable for accrued1 decommissioning obligations. BSEE enforces accrued decommissioning obligations against predecessors in interest by issuance of a Decommissioning Order, which typically occurs after lease owner or operator default. Instances of default by a lease owner or operator can include failure to timely2 perform accrued decommissioning obligations, bankruptcy, lease relinquishment, or an affirmative statement to BSEE that the operator will not complete the required decommissioning.
1 As utilized in this response letter when referencing decommissioning obligations, the term “accrued” has the meaning prescribed in 30 C.F.R. § 250.1702.
2 30 C.F.R. § 250.1710 requires permanent abandonment of all wells on a lease within one year after the lease terminates.
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 4
After regularly selling assets over many years, the Company undertook a significant asset sale program in 2015 and 2016 whereby the Company sold most of its GOM shelf assets (generally 800 feet of water and shallower). Additionally, between 2000 and 2020, Chevron acquired companies that had similarly sold assets prior to acquisition, such as Texaco Corporation (“Texaco”), Unocal Corporation (“Unocal”), and Noble Energy, Inc. (“Noble”). From 2000 to 2018, Chevron, Texaco, Unocal, and Noble each sold assets to Cox and Fieldwood, subsidiaries or affiliates of Cox and Fieldwood, or to other companies that were subsequently purchased by Cox or Fieldwood. Following these sales, Cox and Fieldwood each filed for protection under Chapter 11 of the U.S. Bankruptcy Code, as detailed in the Appendix.
“Decommissioning Orders” are issued by BSEE in the ordinary course of administering regulations and outside of bankruptcy proceedings after decommissioning liability is defaulted upon by debtors. Although the Company’s regulatory liability is not determined or assigned by a bankruptcy court, Chevron monitored the progression of bankruptcy proceedings of both Cox and Fieldwood in order to evaluate whether developments were likely to result in BSEE issuing Decommissioning Orders to Chevron as predecessor in interest in assets then owned and/or operated by the named debtors. During bankruptcy proceedings, both Cox and Fieldwood defaulted on their regulatory decommissioning obligations with respect to assets purchased from the Company. Substantially all of the $1.9 billion loss that was recognized during the fourth quarter 2023 was related to the bankruptcies of Cox and Fieldwood, with approximately 80 percent attributable to Cox.
During the periods leading up to the fourth quarter 2023, significant uncertainty existed as to whether, when and to what extent decommissioning obligations previously assumed by Cox and Fieldwood could revert to Chevron. Multiple commercial outcomes were possible under the U.S. Bankruptcy Code including potential sales of assets (including assets where Chevron was in the chain of title) to third parties, numerous Cox assets were generating revenues through production of oil and natural gas, and Cox had not yet defaulted on its decommissioning obligations. In addition, the Company did not know which leases would be sold by Cox and which decommissioning obligations previously assumed by Cox would ultimately revert to the Company. The Company also considered the asset retirement obligation balance derecognized in connection with the 2015 sale. As a result, in the second and third quarters of 2023, Chevron deemed the liability with respect to Cox-related decommissioning obligations as reasonably possible but not probable and estimable, and did not expect the amount could result in a material loss. The Company provided qualitative disclosure on this possible exposure in the Management’s Discussion and Analysis (“MD&A”) sections of the Company’s second and third quarter 2023 Forms 10-Q.
In December 2023, a subset of producible leases from the bankruptcy estate of the Cox Debtors (as defined in the Appendix) was sold to a third party, but in a lesser amount than the Company had anticipated, potentially indicating more decommissioning obligations than anticipated reverting to the Company. Also, in December 2023, the Cox Debtors filed a Motion to Abandon, including producible leases. As a result of these events, and the related new information, the Company concluded it was now probable that decommissioning obligations from leases within the Cox Debtors’ estate would revert to the Company due to its status as a predecessor in interest to the Cox Debtors. The Company then recorded a liability that represented its best
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 5
estimate of future costs, given current facts and circumstances around the scope, industry-wide cost estimates, and current attribution of Chevron’s share of the decommissioning costs. In future periods, as bankruptcy proceedings progress, the Company will continue to assess its obligations and adjust the liability as necessary and provide disclosures of any losses that may be incremental to what is accrued if the additional loss is reasonably possible and materially different from the amount accrued.
The Appendix outlines the relevant facts as they pertain to substantially all of the liability recognized by the Company in the fourth quarter of 2023.
•Tell us how you considered the application of ASC 450-20-50, Item 103 of Regulation S-K, Item 105 of Regulation S-K and Item 303 of Regulation S-K to those facts in the periods prior to the fourth quarter of 2023. As part of your response, address the requirement to describe any known trends, events or uncertainties that are reasonably likely to have a material impact on your liquidity, capital resources or results of operations.
Company Response:
As previously stated, Chevron applies ASC 450 when assessing loss contingencies related to previously sold assets, with the decommissioning obligations assumed by the buyer. As explained above and detailed in the Appendix, in the second and third quarters of 2023, significant uncertainty existed as to whether, when and to what extent decommissioning obligations previously assumed by Cox and Fieldwood could revert to Chevron, as there were multiple commercial outcomes available under the U.S. Bankruptcy Code, numerous Cox assets were generating revenues through production of oil and natural gas, and Cox had not yet defaulted on its decommissioning obligations. The Company also considered the asset retirement obligation balance derecognized at the time of the 2015 sale. Therefore, Chevron deemed the liability with respect to Cox-related decommissioning obligations as reasonably possible but not probable and estimable, and did not expect the amount could result in a material loss. In December 2023, a subset of producible leases from the Cox Debtors’ estate was sold to a third party, but in a lesser amount than the Company had anticipated, potentially indicating more decommissioning obligations than anticipated reverting to the Company. When the Cox bankruptcy proceedings advanced and the Cox Debtors filed a Motion to Abandon, including producible leases, Chevron determined that it was now probable that Cox would default on its decommissioning obligations and a loss was reasonably estimable, given current facts and circumstances around the scope of liability, industry-wide cost estimates, and current attribution of Chevron’s share of the decommissioning costs. At that time, the Company expanded its disclosure in the 2023 Form 10-K, Note 24 – Other Contingencies and Commitments as follows:
In addition, some assets are sold along with their related liabilities and in certain instances, such transferred obligations have reverted and may in the future revert to the company and result in losses that could be significant. In fourth quarter 2023, the company recognized an after-tax loss of $1,950 related to abandonment and decommissioning obligations from previously sold oil and gas production assets in the
Ms. Myra Moosariparambil
U.S. Securities and Exchange Commission
August 7, 2024
Page 6
U.S. Gulf of Mexico, as companies that purchased these assets have filed for protection under Chapter 11