Chevron (CVX) has a far reach into not only oil and gas exploration and production, but also coal and rare earth mining, chemicals and lubricants, geothermal power, and much more. The company is entering new deals and joint ventures, making claims to even more successful plays than ever, expanding its holdings into global trading, shipping, pipelines, manufacturing, mining, chemicals, and technology.
With such broad expertise and so many profitable deals working, Chevron is a company that I believe should be bought as soon as possible. With the predictions of natural gas prices increasing and new deals bringing more workable cash online, an investor cannot go wrong buying this company and holding on to that investment for a very long time. The reward is watching the returns of the investment while the company grows.
The company continually compounds its successes in Australia. Most recently, Chevron entered a deal regarding the $29 billion Wheatstone Project located about 7.5 miles west of Onslow, off Western Australia's Pilbara coast, with the Japanese utility firm Tokyo Electric Power Company (TEPCO). The deal involves Chevron selling additional 0.4 million tons of liquefied natural gas (LNG) annually from the Wheatstone Project for nearly the next 20 years to TEPCO and also involves the sale of a 10% participating interest in the Wheatstone field licenses and 8% stake in the Wheatstone natural gas processing facilities by Chevron to TEPCO.
The first phase of the project is the construction of two trains, or processing units, with a combined capacity of 8.9 million tons of LNG a year, as well as a domestic gas plant. The new project is expected to up and running by 2016. Chevron is currently serving as the operator of the project along with partners Kuwait Foreign Petroleum Exploration Co., Royal Dutch Shell, Apache (APA), and Kyushu Electric. Kyushu Electric had stated back in February that it plans to triple the volumes of oil and liquefied natural gas it planned to buy in the peak winter December-March period to 22.2 million barrels of oil equivalent. Apache has a 13% interest in the project and expects the first dom gas production to begin in 2018 with the first LNG delivery to begin in late 2016.
Chevron is setting itself up to become one of the largest LNG producers in Australia with its $37 billion Gorgon project, also off Western Australia, that is expected to produce 15 mtpa by 2014. In another deal, the company announced that its wholly owned subsidiary Chevron Global Energy Inc. will be assigned a 50% working interest in Blocks 42 and 45 offshore Suriname through an agreement with Kosmos Energy Ltd (KOS). The deal specifies that Kosmos will have a 50%t working interest and remain operator of both blocks until the end of the exploration phase. Chevron then, will assume the remaining 50% working interest and will be the operator following any commercial discoveries. Blocks 42 and 45 cover a combined area of about 2.8 million gross acres, at water depths ranging between 650 and 8,500 feet and are approximately 155 miles from Paramaribo. Kosmos is an oil-and-gas exploration company that has been producing wells off the coast of Ghana, with exploration prospects in Africa and South America. Kosmos had reported first quarter 2012 losses of -0.04 per share, but had reported annual 2011 earnings of 0.12 per share. Kosmos also had first quarter 2012 revenues of $116.547 million, 47.42% below the prior year's first quarter results.
Chevron is making headway in other areas as well. In the technology field, the company hit on a winner with its "intelligent field," or "i-field," which gathers advanced technology and communications to improve performance of some of its most productive plays throughout the world. The company is firing up six to eight mission-control centers focused on separate business areas, ranging from drilling wells to machinery to reservoirs. These high-tech centers monitor Chevron's assets in real-time relying on sophisticated computer algorithms for early detection of problems.
This is a breakthrough for the company because now Chevron can use the i-field in all its global operations, spanning six continents, to keep control of costs and creating more effective and efficient systems. Regarding the new technology, the president of Chevron Energy Technology Company, Paul Siegele said, "There's been a technology explosion of things that have been referred to variously as digital oil field, intelligent field and intelligent well, but it's really been over the last couple years where it's all come together." The system works because it was designed with thousands of tiny sensors that monitor field operations and transmit data, both wired and wirelessly, back to central locations. These sensors automatically and instantly track pressure, temperature, and other readouts aiding with the mapping of underground fuel deposits that allows the company to maximize production which translates to maximizing profits. The company also uses analytics to evaluate data streams in real-time from oil wells, drill rigs, and ships.
Along with profitable joint ventures, creative use of technology, and higher production of oil and gas, the company needs more and faster modes of transporting oil to needed areas. The company is currently seeking priority access to capacity on the Trans Mountain pipeline to Canada's West Coast from Alberta. Chevron says that crude supplies for its British Columbia refinery are dwindling as other shippers rally for limited capacity. According to a filing by the company, the 300,000 barrel a day line has been overbooked solidly since late 2010 making access more difficult for spot shippers.
Chevron's Burnaby plant supplies nearly a third of the gasoline in Canada's Westernmost province, has received nearly all its oil from the pipeline since 1954, which is owned by Kinder Morgan Energy Partners LP (KMP), currently the largest independent owner and operator of petroleum product pipelines in the U.S. with more than 28,000 miles of pipeline and roughly 180 storage terminals. Kinder is also the largest carbon dioxide marketer in the U.S. A proposal by Kinder Morgan includes a $4.1 billion expansion that would more than double the capacity of Trans Mountain, but that would not be in service before 2017. Pushing for this kind of change is typical for Chevron as it aggressively tries to get its energy products and resources to market. Kinder Morgan Energy and Kinder Morgan are currently entertaining a plan to acquire El Paso, which would create the largest natural-gas pipeline system in North America and will enable the partnership to get involved in liquefied natural gas along the Gulf coast.
As the company continues expansion, it continues to please investors. Chevron reported first quarter 2012 earnings of $3.27 per share, exceeding last year's first quarter results by 5.83%. The company had first quarter 2012 revenues of $60.705 billion, 1.20% above the prior year's first quarter results, and had revenues for the full year 2011 of $253.706 billion, 28.01% above the prior year's results. In 2011, the company reported a dividend of $3.09, representing a 8.80% increase over last year. The company currently provides a dividend of $3.60 per share, currently paid in quarterly installments. This provides a strong advantage over competitors. While the Netherland's Royal Dutch Shell (RDS.A) has seen its shares fall roughly 9% over the past year, its dividends have been somewhat healthy (5% yield), but not nearly as safe as Chevron's. Also, BP (BP) may have once been a challenge for Chevron, its focus has been on paying out claims to victims of the 2010 Deepwater Horizon tragedy. BP had to cut its dividend in the process of building funds for defense as well as for fines and penalties.
Finding new plays, producing great products, using the newest technology, and making change happen are just part of Chevron's DNA. The company continues to improve on excellence and is why it is a must for investors to be a part of.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.