| The SM is calculated based on the average prices received over the past 12 months for oil, NGLs and natural gas. In a nutshell, it's an attempt to account for the value of the reserves that a company is likely to develop based on certain defined criteria. Changes in commodity prices or in a company's plans can impact the value of the SM. In Chevron's case, it looks like both played a factor. Appalachia shale gas production continues to grow rapidly, and that is keeping natural gas prices depressed. That situation doesn't look like it will improve soon, so companies are reevaluating their plans there. Misreading the Significance Some have misread Chevron's write-off as something akin to "This is yet another symptom of peak oil demand and the demise of the oil industry." That's inaccurate. These write-offs aren't a function of falling demand. They are a function of supplies rapidly expanding, and outpacing demand. The net impact may look the same, but the underlying cause is different. This is important, because these differing causes would likely play out differently over the next few years. These impairments are included in net income, but represent only a paper loss. They don't affect cash flow but are rather a change in estimates of future cash flows. Sometimes you will see oil and gas companies report a net loss but positive free cash flow. This impairment is most accurately viewed against a company's SM, and not its current income. Chevron may charge its ~$10 billion impairment against this year's results. But that's in the context of a standardized measure for Chevron that was $94.6 billion at the end of 2018. That number had actually grown by $28.8 billion over the previous year, and $23.5 billion the year before. During the past 10 years, Chevron's SM has ranged as low as $42.4 billion after the oil price crash of 2015 to as much as $113.6 billion when oil prices were still $100 a barrel. The appropriate level of concern about these impairments depends on many factors. But it's ultimately important to understand what these impairments really signal. Significant impairments like this generally attract a lot of media attention. Substantial increases to a company's future cash flows do not.
Editor's Note: After reading about these uncertainties concerning Chevron, maybe you're looking for safer, more reliable ways to make money. Consider our colleague Jim Fink. Jim Fink is the chief investment strategist of Velocity Trader, Options for Income, and Jim Fink's Inner Circle. Jim has developed a proprietary method that consistently beats Wall Street at its own game, in markets that are going up, down or sideways. Jim's ingenious "310F" trade is a time-proven way to double your stake in just three days… 321 out of 324 trades paid out over the past three years. Want to learn Jim's investment secrets? Click here now for details. | 
Tidak ada komentar:
Posting Komentar