Key Takeaways
Chevron Corp. (CVX) shares fell more than 6% on Wednesday after the company reported that its Wheatstone liquefied natural gas facility in Australia suffered extensive damage from a tropical cyclone, forcing a multi-week shutdown.
The damage at the Wheatstone facility was more extensive than at the company's nearby Gorgon facility and worse than in previous cyclones, Chevron’s director of operations and maintenance for Australia said in a statement reported by Reuters. The company indicated that a resumption of full production is unlikely for several weeks.
The energy giant’s stock fell from a previous close of $210.71 to as low as $197.40, a decline of about 6.3%, which wiped out approximately $25 billion in market capitalization. The sell-off hit a broader basket of oil stocks, with Occidental Petroleum (OXY) falling over 4%, while ConocoPhillips (COP) and Petrobras (PBR) each dropped more than 3%. The move coincided with a 2.81% drop in Brent crude futures.
The shutdown strikes a direct blow to one of Chevron’s highest-margin businesses, with investors now pricing in the impact of lost production, repair costs, and potential force majeure declarations on LNG contracts. The disruption could pressure near-term cash flow and production targets ahead of the company’s first-quarter earnings report due in late April.
The sudden drop surprised investors, coming just a day after analysts at Simply Wall St suggested the company’s intrinsic value could be 43.6% above its trading price. The operational setback contrasts with recent bullishness, underscored by Zacks Investment Research highlighting the company's low breakeven oil price and a $19.8 billion long position held by Warren Buffett’s Berkshire Hathaway.
The 8.9 million-ton-per-year Wheatstone plant is a critical part of Chevron’s global LNG portfolio, serving as a key supplier for Asian markets and for domestic gas in Australia. Investors will be closely watching for further updates on the repair timeline and any revisions to the company's full-year guidance.
This article is for informational purposes only and does not constitute investment advice.
