Buy-recommended Chevron Corporation (NYSE:CVX) offers unlevered appreciation potential of 18% to estimated net present value [NPV] of $105 a share. In third quarter results reported today, production generated a high level of unlevered cash flow (Ebitda) while the more volatile downstream (Other) was lower than normal.
Concentrated 66% on oil, NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P). On the quarterly call, Executive Vice President George Kirkland, citing current oil and gas price trends, said he had “a bias to be oilier”.
Mr. Kirkland reviewed progress on major expansion projects in the Gulf of Mexico, Nigeria, and Kazakhstan while stressing a modest 4-5% annual decline in existing production. Meanwhile, a renewed rise in oil price may take six-year futures to another double as was the case from the end of 2004 to mid 2006, subject to short declines from time to time.
Originally published on November 2, 2007.