News for Chevron (NYSE:CVX) is mixed at present as it battles lawsuits while at the same time signing significant deals and focusing on expansion.
Chevron is currently engaged in a lawsuit involving an oil spill in Brazil. The latest development in the case is that the presiding judge has elected to have the trial moved to Rio de Janeiro as it has been decided that the spill occurred outside of national waters and involved a Liberia-registered ship. Some believe that the company will meet with a more sympathetic atmosphere in Rio than in Campos, the city in which the trial was initially held. Chevron also insists that investigations will reveal that the company and the employees of the company acted responsibly and appropriately to the incident. Because lawsuits of this kind can have a huge impact on a company's stock, it is definitely something that you should keep an eye on.
Chevron is not the only oil company in the news due to lawsuits. Chevron competitor, BP (NYSE:BP) is still engaged in a battle regarding the well-documented oil spill in the Gulf of Mexico in 2010. Most recently the trial has erupted into what will most probably turn out to be one of the largest class-action settlements ever as 100,000 people and businesses made claims against the oil giant. The amount that BP is expected to pay is about $7.8 billion in order to resolve these claims. However, there is no cap on the amount, and so in the end, BP may end up paying a whole lot more than even this.
As one of its main competitors faces the possibility of this enormous payout, Chevron has joined the liquid natural gas frenzy that may be considered the way forward for energy companies. A preliminary agreement between Chevron's Australian subsidiary and Chubu Electric Power, in which Chevron will sell liquid natural gas to Chubu was signed, although at this stage the agreement is not yet binding. The Wheatstone plant that will provide the liquid natural gas will be located off the coast of Australia and is currently under construction with first shipments of liquid natural gas from the plant projected to begin sometime in 2016. The financial implications this will have on the two companies has not yet been made publicly clear. This is just one example of the many deals that Chevron has made in an attempt to distribute its liquid natural gas resources effectively. Liquid natural gas is quite possibly the new way forward and attempts made by any company to capitalize on this may be a guarantee of future success..
If Chevron's plant is successful, it will become the largest producer of liquid natural gas in Australia. This is aided by the fact that Japan has begun to rely heavily on liquid natural gas resources distributed by companies like Chevron, in an attempt to replace nuclear power in the country the same nuclear power that provided an international scare after its earthquake disaster last year.
It must be noted that Chevron is not the only company expanding in this direction. Competitor Anadarko Petroleum (NYSE:APC) also recently announced its intention to collaborate with Enterprise Products Partners L.P. (NYSE:EPD) in the development of a 435 mile long natural gas pipeline from Denver-Julesburg Basin in Weld County, Colorado to Skellytown, Texas. Not only will this allow for efficient and beneficial distribution of natural gas liquids between the two states, but the pipeline will also connect with several other pipelines in existence creating a far-reaching effect on the country. The general consensus is that this will have a positive effect on Anadarko stock.
A competitor that is taking a slightly different stance is Royal Dutch Shell (NYSE:RDS.A) which has recently been criticized in the news for flaring gas, instead of trapping it to sell as liquefied natural gas, in its dealings in Nigeria. If the gas was utilized in liquid form it would be possible to sell to Nigeria, a country that experiences power shortages, despite being one of the biggest oil producers in the world. To combat this, the company is considering launching new projects that will cost something in the region of $4 billion. These projects are aimed at reducing flaring in the region. Shell is still a company to look out for, but a close watch is needed on its international dealings.
Exxon Mobil (NYSE:XOM) has also recently signed a deal with Rosneft to explore for oil in the Arctic and the Black Sea. This deal, which was signed at the private residence of Russian president Vladimir Putin, will give Exxon Mobil access to some of the world's richest sources of oil and thereby improve the company's standing in the stock market significantly. Exxon Mobil, already the largest of the competitors in question, is looking to take a larger market share, and push companies like Chevron from the arena.
Although Chevron is making significant headway in the exploration for and drilling of new resources of fuel, it faces tough competitors which have the ample cash flow and resource possibilities to take over its share of the market.
In general, it seems that Chevron plans to expand in all areas, not simply in its focus on liquid natural gas. Recently, it was announced that Chevron plans to open 400 more ExtraMile brand stores by the end of next year. Implications for this expansion on stocks are as yet unclear, but the chances of a positive ripple effect are high, provided expansion efforts are successful. Chevron will need to keep making these expansion steps if it hopes to compete with its competitors in the industry. There's hope for the company, assuming its Brazilian legal troubles leave the picture soon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.