- Raymond James analyst Pavel Molchanov examines Chevron’s (NYSE:CVX) Gorgon liquefied natural gas project in Australia - which it shares with Exxon and Shell - and anticipates an "immediate cash flow benefit,” despite the possibility of hiccups along the way.
- The cash flow benefit for CVX as well as its partners will come almost immediately upon the opening of Gorgon, even if it takes 12 months or a bit longer to fully ramp up, Molchanov says, and end a cash expenditure estimated at $4.5B in 2014 and $3B in 2015.
- The other big benefit is the start of cash generation from the project, which will partly be a function of commodity prices; using a 2016 Brent forecast of $62/bbl, Molchanov estimates cash flow net to CVX of $2.1B at full utilization, while at a long-term forecast of $77/bbl, cash flow would be $2.9B.
- CVX's annual dividend payout - which currently comes entirely from the balance sheet - is $8B, so "when we combine the two components of the cash flow swing - less cash going out, and more coming in - the sum is enough to fund [roughly] two-thirds of the dividend, even at our 2016 oil price assumption."