10+ year employee here. Wondering why this company is so hell bent on divesting. Upstream, Downstream, Midstream. Where is this company going? Are they using the "shrink to grow" strategy? Outside of Tengiz and the Permian, what is the next bright spot for this company? If Chevron wasn't so big, I would seriously think they are trying to prep the company for a sale.
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5ymk, not really sold on the long term viability of shale. It's more like a hit of speed for these oil companies but not sure if it will be around in 10+ years. Too bad Chevron with its size cannot take advantage of the mega projects that should be its competitive advantage. Chevron should actually be doing WAY more large projects but they would need a competent PRC and senior management to pull that off.
10+ year employee here too. I am grateful I made the downsizing cuts. On the next note I think it is safe to say, even from an individual contributor viewpoint, that we are rightsizing for what will be a 10+ year push into shale.
It is kind of weird that you would assume I’m laid off (false) making less in benefits (false) or that I didn’t enjoy working at Chevron (false) . I still hope Chevron succeeds which is why I visit this site, and if something isn’t working people find the courage to change. Cheers to you amigo!
After working as an engineer for 8 years at Chevron I work in a different industry at a small company which is ~1% if it’s size. Something which has really shocked me is how much better management can be outside of a large company (chevron) and how much has changed in best practices of running a company. In hindsight I wish they would hire outside of the organisation for some key positions (aka CEO).
From Guru Focus:
Return on capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Chevron Corp's annualized return on capital (ROC) for the quarter that ended in Mar. 2018 was 5.39%.
As of today, Chevron Corp's WACC % is 8.24%. Chevron Corp's return on capital is 2.30% (calculated using TTM income statement data). Chevron Corp earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Finance is just like any other mass balance. If their weighted average cost of capital (what they need to pay to service debt and provide income to shareholders) exceeds the return on invested capital ( what they make from operations), they have no option but to shrink by selling assets. Tengiz is the last big project they have that has low enough break evens to make a dent, don’t know if they know how to operate Permian assets effectively to be efficient. Time to get serious about “new ventures” or slowly become a dinosaur.
Watson was effectively laid off several years short of his expected 10 year tenure. He mismanaged Gorgon and other projects as well as the price collapse. We had a panic for cash while Exxon scooped up some of the best new assets in the world at low prices.
Here is you answer here: https://seekingalpha.com/news/3368781-chevron-s-watson-highest-paid-energy-boss-2017
Watson cleaned up last year even though Gorgon and Wheatstone have blown through all the cost and schedule milestones. The company has been more concerned with short term profit than long term. Hopefully this won't come back to bite in the future.
Actually, it’s no different than when an individual investor fine-tunes their investment portfolio. Trim and sell here, invest more there. Concentrate on the strategic core areas where you are likely to have highest profitability now and in the future.
Expat positions will also diminish.
What about precious expat positions
The way I see it is that all high-cost extraction projects are history. What is gold dust right now is cheap extraction shale oil so if we want to survive that’s where to go. North Sea is finished as costs are too high.
-vdw: Not sure it is about reserves in hand, as Chevron is selling stable long-term reserves to get cash for new ventures (and the dividend obviously). It is a calculated choice, but riskier than staying the course. If the new ventures prove highly profitable, and the long term investors stay happy, Chevron could rise to best of class and own market price will rise (pay day for sr. management!). If multiple new ventures major caps go south, Chevron will be very hurt without it’s solid underlying base business assests...but then Sr. management can just cut their loses and move to new companies. The new American way...is it not great!, again.
Lost its skills, values, ethics, morals, ability, acumen, experience and integrity. Other than that, its the same old Chevron OP.
It’s all about reserves. If an oil company expects to keep and find more investors, it better have future reserves in the queue. Selling non performing assets to acquire better assets is the way to go.