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Chevron: Thanks To Falling Oil Prices, Chevron Is Now A Compelling Buy
- Chevron's shares were punished lately for falling crude oil prices.
- Chevron's current valuation is now very reasonable.
- Oil prices are only temporarily depressed, but should return to higher price levels in the medium term.
- Chevron's shares yield 3.61%, which makes waiting for higher oil prices much more bearable.
Chevron Q3 Earnings Review: Permian Operations Strong, International Shale Moving Forward
- Chevron raised its Permian growth projections on the back of strong results.
- With over 1.5 million net acres in the Delaware and Midland Basins, Chevron has over 13,000 possible drilling locations on its acreage.
- Targeting the Avalon shale through the Salado Draw program will give Chevron a better idea of what to expect on its expansive acreage.
- Chevron is moving forward with its exploration plan for the Duvernay shale, putting the $1.5 billion it just raised to good use.
- Its drilling programs in the Duvernay and the Vaca Muerta shales are targeting billions of barrels of crude and hundreds of trillions of cubic feet of natural gas.
Update: Three Years Later, Chevron And Hess Produce First Oil From Tubular Bells
- It's official, the Tubular Bells is now operational.
- The success of this project is a big vote of confidence for Chevron's growth plan and the future development of the Stampede field.
- This is a huge milestone for Chevron's plan to steadily grow its production out of the Gulf of Mexico.
- The current Cold War will be shorter than the last one.
- It is being fought out over oil prices. The glut hurts Russia and Iran.
- The conflict will last months not years, and result in higher prices, benefiting strong balance sheets.
Chevron Q3 Earnings Review: Gulf Of Mexico And Gorgon LNG
- Chevron's partnership with Hess has paid off, as the Tubular Bells project starts up.
- Management reaffirms plan to bring the Jack/St. Malo fields online this year.
- Big Foot and Stampede developments will keep fostering growth from the Gulf of Mexico.
- The Gorgon LNG facility moves forward, but no word on new long-term contracts.
- No comment from management about possible labor tensions in regards to the construction of the Gorgon LNG facility.
Shale Oil Production Offers Positive Talking Point For Chevron
- Oil production from the Permian Basin is forecast to be 10% higher than earlier estimates.
- Chevron, and a very few other Majors, have fared better than most E&P firms in the industry's current malaise.
- Timed in a conservative manner, technological advances and applying best practices have allowed Chevron to leapfrog other peers.
Chevron: What Can We Take Home From This Company's 3rd Quarter?
- Chevron reported higher earnings per share for the third quarter, but lower sales due to lower crude prices.
- Downstream operations, however, performed very well on the back of lower feedstock costs and better refinery reliability in the U.S.
- With long-term demand for oil, a strong dividend, a strong balance sheet, an attractive valuation, and both operational and geographic diversification, Chevron makes for a fine long-term investment.
- Current stock valuation implies a 5.0%%-5.5% dividend growth assumption.
- Given Chevron's cash flow growth potential, steady capex prospect, and ample leverage capacity, a 6%-7% annual dividend growth can be comfortably sustained over the next few years.
- The potential solid return owing to the current conservative valuation and attractive dividend yield should substantiate a buy rating.
- CVX remains committed to protect investors and preserve the growing free cash flow balance the company has promised to deliver.
- CVX is in the middle of a high level of spend (about $10 billion per year) on its two megaprojects, Gorgon and Wheatstone.
- Post these megaprojects, CVX's shareholders should enjoy a period of higher cash flow, lower capital intensity, and the prize of growing investment in the Permian.
- EPS were $2.95 in Q3 2014, which beat analyst consensus estimates of $2.54 by 16%.
- Chevron CEO said: "Despite a decline in crude oil prices, our third-quarter earnings were higher than a year ago".
- I believe dividend investors should own Chevron, and the strong Q3 results continues to reinforce that thesis.
- "Forever Hold" stocks must represent companies intrinsic to the human experience.
- Fossil fuels a.k.a. oil are absolutely essential to human existence.
- It's just a matter of choosing which stock you like best. I like this one.
Update: Chevron And Its Partners To Proceed With The Stampede Project In The Gulf Of MexicoCallum Turcan • Thu, Oct. 30
- Hess, Chevron, Statoil, and Cnooc have agreed to proceed with the $6 billion development of the Stampede field.
- This is good news, as Chevron has partnered up with Hess on the Tubular Bells project, making it a strong vote of confidence for Chevron's near-term GOM growth prospects.
- Chevron now has another source of growth to keep increasing its production base beyond its 2017 guidance.
- Chevron announced it sanctioned the Stampede Project in the Gulf of Mexico.
- Designed capacity is 80,000 BOEPD and recoverable resources are 300 million BOE.
- My dividend increase target of 40% by 2017 is unchanged, and will likely move higher as more projects are announced.
Dividend Aristocrats In Focus Part 25: Chevron's 5%+ Yield On Cost In 5 Years
- This article details the competitive advantages (there are several) and future growth prospects of oil and gas industry behemoth Chevron.
- Chevron has a dividend yield of 3.7%, extremely high in today's low interest rate environment.
- Find out if the company's growth prospects are favorable or less than desirable.
- Investors should take advantage of sell-offs to buy quality companies at great prices.
- At 10.5x earnings, Chevron now has a high margin of safety that makes it an attractive investment.
- While production growth has been underwhelming, we are nearing an inflection point where projects come online and cap-ex falls, leading to higher free cash flow.
- Its integrated model, solid dividend, and conservative balance sheet make CVX an attractive buy here.
- A strike at one of the facilities that services the massive Gorgon LNG project has forced Chevron to delay its start-up date.
- In its quarterly update, Chevron should be able to announce when the Jack/St. Malo project will come online and what investors should expect production wise.
- Chevron will be able to comment on how it plans to explore and develop the Duvernay shale in Canada after raising $1.5 billion through a 30% stake sale.
Cash Is King: Here Is How To Take Advantage Of The Big Sell-Off
- Cash is king now, but only if you use it to buy cheap assets for the long term.
- A significant pullback in the market is creating a buying opportunity that many investors have been wanting.
- A spike in the VIX Index may now be signaling that the current pullback is a buying opportunity.
- Concerns about Ebola appear to be very overblown and other "fear factors" could subside in time as well.
- The stock appears to be inexpensive on 2015 earnings estimates, but the oil industry is in steep decline at the moment.
- The company pays a high-yielding dividend and has quite a bit to grow it as the payout ratio is only 41%.
- The stock is in oversold territory and may be presenting a good opportunity to put a toe into the water.
After Large Oil And Gas Industry Pullback, The Time Is Now For Chevron
- Large pullback of both small and large market cap oil and gas companies presents opportunity for investors.
- Chevron looks poised to grow and rebound from 15% loss in the past couple of months.
- Investment is based on strong financials, economic moat, and dividend trends.
Mon, Nov. 24, 10:45 AM
- Exxon Mobil (XOM -0.8%) and Chevron (CVX -0.4%) are lower as Raymond James downgrades both companies given their limited leverage to potential improving oil prices, while analyst Pavel Molchanov feels oil is within weeks of bottoming regardless of the OPEC decision.
- In cutting shares to Market Perform from Outperform, the firm says XOM's "ultra defensive" characteristics, including a large chemicals and refining businesses, have insulated the company from the worst of the falling oil prices, but it still expects the stock to be a middling performer.
- CVX, which is reduced to Outperform from Strong Buy, is approaching the peak of its spending while production growth should accelerate in the next two years, the firm says.
- Also, Molchanov upgrades Occidental Petroleum (OXY +0.8%) to Strong Buy from Outperform and Hess (HES +0.1%) to Outperform from Market Perform.
Fri, Nov. 21, 5:55 PM
- Four years after the Deepwater Horizon disaster, giant new oil projects are returning to the Gulf of Mexico - bigger and more expensive than ever - even as U.S. oil prices are below $80/bbl at a four-year low.
- New projects alone have the combined capacity to pump ~900K bbl/day: Hess (NYSE:HES) said Monday it had started pumping crude from its deepwater Tubular Bells installation, Exxon (NYSE:XOM) and Anadarko (NYSE:APC) plan to start up two more major Gulf projects in coming months, and Hess, Chevron (NYSE:CVX) and other partners recently OK'd a $6B Gulf development.
- Even BP is returning in a big way, with two Gulf projects and plans to spend $4B/year in the Gulf for the next decade, as it works on technology to drill at greater depths.
- All this is happening even as costs are jumping, partly because companies are drilling farther from shore and in deeper waters; deepwater wells are up to 25% more expensive today than in 2010, and drilling the average deepwater Gulf well takes 13% longer than it did before the 2010 spill.
- Shell’s (RDS.A, RDS.B) 100K bbl/day Olympus, which came online ahead of schedule and under budget, began tapping oil and gas in the Gulf in February; it is also working on a new Gulf project that will tap an oil field under 9,500 feet of water, 3x deeper than Olympus.
Thu, Nov. 20, 5:58 PM
- It’s time for the medium-term investor to start buying the biggest of big oil companies, HSBC says, as the market seems to have capitulated on the sector.
- HSBC views BP and Total (NYSE:TOT) as clearly the cheapest of the oil supermajors, with share price discounts to sum-of-the-parts valuation for BG Group (OTCPK:BRGXF, OTCQX:BRGYY), Statoil (NYSE:STO) and Repsol (OTCQX:REPYY, OTCPK:REPYF); Exxon Mobil (NYSE:XOM) still trades at small premium to the SoP valuation, and the firm likes Chevron (NYSE:CVX), which was penalized in its valuation by its ongoing capital intensity in 2017.
- The stocks also offer average prospective dividend yields of 5%-plus for 2015, and the dividends look robust as they are supported by strong balance sheets, more active asset disposal programs, and strong new project cash margins.
Mon, Nov. 17, 10:22 AM
- Hess (HES -2.3%) says production has started from the Tubular Bells field located in the Mississippi Canyon area of the deepwater Gulf of Mexico.
- Following a ramp-up period, Tubular Bells is expected to deliver gross production of ~50K boe/day from three producing wells by year end.
- Hess says Tubular Bells is a major accomplishment that could pay out over decades; despite lower oil prices, the success encouraged Hess and three other oil companies last month to sanction the Stampede deepwater Gulf development.
- Hess is the operator and holds a ~57% interest in the field, with Chevron (CVX -0.7%) claiming the remaining ~43%.
Fri, Nov. 14, 4:56 PM
- New developments and the expansion of older oil fields are expected to lift deepwater Gulf of Mexico production 18% Y/Y to 1.9M boe/day in 2016, the first new production peak seen since 2009, according to Wood Mackenzie’s latest outlook.
- However, production is expected to plateau for the remainder of the decade following the 2016 peak due to the depletion of legacy fields and a limited number of new projects coming onstream.
- Among top Gulf producers: RDS.A, RDS.B, BP, CVX, BHP, APC, APA, HES, E, EXXI.
Thu, Nov. 13, 3:20 PM
- U.S. crude oil prices break below $75/bbl for the first time in more than three years, brushing aside an IEA report showing a surprise 1.735M barrel inventory drawdown as well as remarks by the Saudi oil minister dismissing talk of an oil price war among producers.
- West Texas crude settled today at $74.21/bbl, -3.9% and breaking below an important support level; during the past three years, futures have tested but not broken through that level three times.
- Brent crude recently was trading below $78, -3%.
- Global oil majors are all lower: COP -1.9%, BP -1.4%, CVX -1.4%, XOM -1.1%, TOT -0.9%, RDS.A -0.7%.
- Oil services companies and offshore drillers suffer even sharper drops: SDRL -4.4%, SLB -4.2%, HAL -3.9%, BHI -3.9%, RIG -3.8%, DO -3.5%, NBL -2.9%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, UGA, DTO, DBO, DUG, XES, IYE, IEO, CRUD, IXC, IEZ, PXE, USL, UWTI, IPW, FENY, PXJ, UHN, DWTI, DNO, RYE, FXN, SZO, GNAT, OLO, DDG, FILL, OLEM, TWTI
Tue, Nov. 11, 6:06 PM
- The U.S. Chemical Safety Board calls for major changes to California's system for regulating oil refineries in its latest report on the August 2012 fire at Chevron's (NYSE:CVX) 257K bbl/day Richmond refinery.
- The report proposes an improved system to regulate the state's oil refineries that would include more proactive inspections and greater involvement of worker safety representatives to reduce the risks faced by refinery workers.
- The shift to a safety-case regime would represent a fundamental change to current practices by requiring companies to demonstrate to refinery industry regulators through a written report how major hazards are to be controlled and risks reduced to as low as reasonably practicable.
Tue, Nov. 11, 2:36 PM
- Nearly $17B in energy company debt has been sold in the U.S. so far this month, tapping into debt capital markets despite a rise in borrowing costs as they seek to refinance or pay off existing debt amid a slump in oil prices.
- Just this week, Chevron (NYSE:CVX) offered $4B in six tranches to repay commercial paper, while Freeport McMoRan (NYSE:FCX) sold $3B in bonds in part to refinance existing debt; last week's ~$10B of energy bonds sold included a $3B offer by ConocoPhillips (NYSE:COP) also intended for refinancing purposes.
- Other energy-related deals in the pipeline for the coming days include a new loan facility for C&J Energy Services (NYSE:CJES).
- Energy bonds have been under pressure in the past couple of weeks as oil prices skid; investors are worried that a further drop in oil prices could put pressure on the highly indebted companies in the sector and potentially trigger a wave of debt restructurings.
Mon, Nov. 10, 3:41 PM
- Chevron (CVX -0.9%) reportedly plans to issue $4B in bonds today in what would be the company’s first since June 2013 and the biggest offering by an energy company since oil prices began plunging to a four-year low.
- The bond offering may be used to help refinance some of the company’s debt including commercial paper borrowings.
Mon, Nov. 10, 8:15 AM
- Chevron (NYSE:CVX) says it has yet to complete an assessment of Romania's natural gas potential from shale, one day after the country's prime minister said "it looks like we fought very hard for something that we do not have."
- Prime Minister Ponta said yesterday in the middle of a presidential campaign that Romania has been searching for shale gas that apparently does not exist, without elaborating.
Fri, Nov. 7, 2:58 AM
- Despite a confirmation from both Venezuela's president and finance minister this past month saying that Citgo will not sell its U.S. refining unit, potential buyers have recently visited its refinery in Illinois and have shown interest in its Texas unit, Reuters reports.
- It is unclear if Citgo's owner, Venezuelan national oil company PDVSA, will go ahead with a sale, but Lazard, the investment bank hired by Citgo to carry out the sale, is still marketing the refinery.
- Potential bidders include, Reliance Industries (OTC:RLNIY), PBF Energy (NYSE:PBF), Tesoro (NYSE:TSO), Marathon Petroleum (NYSE:MPC), Valero Energy (NYSE:VLO) Phillips 66 (NYSE:PSX), Koch Industries and Chevron (NYSE:CVX).
Thu, Nov. 6, 6:27 PM
- The Chevron-Phillips 66 (CVX, PSX) joint venture is considering adding another expansion to its Baytown, Tex., plant, joining a wave of other petrochemical companies scrambling to take advantage of cheap raw materials unleashed by the U.S. shale boom.
- The JV company, which is already building a $6B expansion at the same Cedar Bayou plant, this week said it is studying how to further increase the plant’s capacity.
- Rather than build a new unit, the JV is studying the possibility of boosting polyalphaolefins capacity by one-fifth to 58K metric tons/year by adding improvements to make the existing plant more efficient; the potential cost of the expansion has not been disclosed.
Thu, Nov. 6, 8:41 AM
- Sasol (NYSE:SSL) says it expects full production at its Escravos gas-to-liquids plant in Nigeria it is developing with Chevron (NYSE:CVX) by mid-2015.
- The plant in the Niger Delta has suffered multiple delays and its development cost has soared to ~$10B from an initial $2.5B; it is expected to produce 33.2K bbl/day of fuel.
- The plant is jointly owned by Nigerian state energy company NNPC and CVX, which uses Sasol's GTL technology.
Mon, Nov. 3, 11:52 AM
- Exxon Mobil (NYSE:XOM), Shell (RDS.A, RDS.B), Chevron (NYSE:CVX) and BP have lower profit margins than a decade ago, according to an analysis in a page one WSJ story, as the big oil stalwarts are shelving expansion plans and shedding operations.
- Combined, the four companies averaged a 26% profit margin on their oil and gas sales in the past 12 months vs. 35% a decade ago, according to the analysis.
- Shell said last week that its oil and gas production was lower than it was a decade ago and is likely to keep falling for the next two years; Exxon's output sank to a five-year low after the company disposed of less-profitable barrels in the Middle East.
- The companies’ sheer size has meant that only huge, complex and expensive projects are big enough to make a difference to the companies’ reserves and revenues; with oil prices now heading lower, such problems only look as though they’re going to get worse.
Fri, Oct. 31, 5:56 PM
- United Steelworkers leaders, representing employees at two-thirds of U.S. refineries, are "looking for a fight" as they prepare to negotiate the next three-year contract with refiners, says the USW international VP who manages the union’s oil sector.
- The USW is seeking a substantial increase in wages, stronger rules to prevent fatigue and measures to preserve the share of union workers rather than contract employees.
- During the last round in 2012, USW and Shell (RDS.A, RDS.B), which represented refiners, spent about a month in negotiations before agreeing to a national contract which was used as the foundation for forging refinery-by-refinery contracts with union locals.
- An S&P index of refiners - including Exxon (NYSE:XOM), Chevron (NYSE:CVX), Marathon Petroleum (NYSE:MPC) and Tesoro (NYSE:TSO) - has more than doubled since the beginning of 2012, and the unions want a piece of the pie.
Fri, Oct. 31, 5:37 PM
- The cheapest crude oil in more than two years has the world’s two top oil producers, Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), glad they held onto their refineries when rivals were shunning the business.
- Both companies reported better than expected Q3 earnings today (I, II), with executives touting the importance of owning massive refineries alongside oil and gas wells, "demonstrat(ing) the strength of our integrated business model," as XOM CEO Rex Tillerson says.
- XOM’s Q3 profit from refining jumped, helping drive a 2.5% Y/Y increase in its total profit, while CVX’s refinery earnings more than tripled, propelling a 13% jump in overall profit; XOM said it sold U.S. oil for $89.60/bbl on average, down 12% Y/Y, while international barrels fetched $96.76, or 9.3% less, and CVX said its U.S. price fell $10/bbl to $87 as international prices fell $93 from $104.
- But sustaining profits could be more of a challenge if demand for fuels continues to weaken around the world, which could limit output and profit gains at refining operations; also, refining profit margins already are shrinking as gasoline and diesel prices are dragged lower by the crude from which they’re derived.
CVX vs. ETF Alternatives
Chevron Corp provides administrative, financial, management and technology support to U.S. & international subsidiaries that engage in fully integrated petroleum operations, chemicals operations, mining operations, and power and energy services.
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