The oil price drop has prompted this leading producer to shed less profitable businesses. That brightens Chevron’s long-term prospects, as does the fact that its refineries benefit from cheaper crude.
CHEVRON CORP. (New York symbol CVX; www.chevron.com) is the second-largest integrated oil company in the U.S. by revenue, after ExxonMobil (New York symbol XOM).
Chevron gets 90% of its earnings by producing oil (67% of total production) and natural gas (33%). The remaining 10% comes from its refineries, petrochemical operations and 8,050 gas stations in the U.S., which operate under the Chevron and Texaco banners. The company owns 400 of these locations and supplies fuel to an additional 8,600 stations outside the U.S.
The company recently sold its 50% stake in Caltex Australia, which owns an oil refinery and 1,800 gas stations in Australia, for $3.6 billion.
The deal is part of Chevron’s plan to sell $15 billion worth of nonessential businesses by 2017. Even with these sales, the company’s oil output will probably average 3.1 million barrels a day in 2017, up 20.6% from 2.57 million in 2014.
That’s mainly because Chevron still plans to start up two big offshore gas projects: the Gorgon field, off Australia’s northwest coast (47.3% owned by Chevron) and the nearby Wheatstone field (64.14%-owned). Each will also have a plant to convert the gas into a liquid for shipment to clients in Asia…
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Energy stocks: Reduced spending on exploration and upgrades helps keep the high dividend safe
Late last year, Chevron also began producing oil at its Jack/St. Malo deepwater offshore fields in the Gulf of Mexico. Chevron owns 50% of Jack and 51% of St. Malo. It operates the platform that pumps oil from both locations.
Jack/St. Malo will help Chevron reach its goal of producing 3.1 million barrels of oil equivalent a day by 2017, up from 2.6 million in the third quarter of 2014. The recent drop in oil prices will hurt this project’s initial profitability, but its reserves should last 30 years.
In response to lower oil, Chevron plans to spend $35.0 billion on exploration and upgrades in 2015, down 13% from 2014. It has also suspended share buybacks. This will let the company keep paying quarterly dividends of $1.07 a share, for a 3.9% yield.
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