U.S. oil production is up 40% since 2008. That’s largely because of new technologies like hydraulic fracturing, or fracking. This involves injecting water, sand and chemicals to break up shale and other tight rock formations and allow access to the oil and gas.
The best way to profit from this volatile industry is through companies with high-quality reserves and diverse operations. Here is one of the diversified U.S. energy stocks we cover regularly.
CHEVRON CORP. $118 (New York symbol CVX; www.chevron.com) is the second-largest integrated oil company in the U.S. after ExxonMobil.
Chevron continues to make progress on two big Australian projects. The first is its 47.3%-owned Gorgon natural gas development off the country’s west coast. Gorgon, which includes a facility to liquefy gas for shipping, is now 60% complete and should start producing in 2015. Chevron’s share of Gorgon’s $52-billion cost is $24.6 billion. Its reserves will last 40 years.
Second Australian project is LNG facility with 30-year reserves
Another big Australian project is Chevron’s 64.14%-owned Wheatstone LNG facility on the country’s west coast. An offshore oil field will supply 80% of the gas for this plant; Chevron owns 80.17% of the joint venture that will build and operate the platforms and supply lines. This project is 10% complete and should start up in 2016. Wheatstone’s reserves should last 30 years. Chevron’s share of the $29-billion cost is $18.6 billion.
In the first quarter of 2013, Chevron’s output rose 0.5%, to 2.65 million barrels of oil equivalent a day (67% oil and 33% gas). However, weaker oil and gas prices cut its revenue by 6.4%, to $56.8 billion from $60.7 billion a year earlier.
Earnings fell 4.5%, to $6.2 billion from $6.5 billion. Per-share earnings declined at a slower pace of 2.8%, to $3.18 from $3.27, on fewer shares outstanding. Cash flow fell 9.4%, to $4.70 a share from $5.19.
The stock trades at 9.5 times Chevron’s forecast 2013 earnings of $12.41 a share, and 5.5 times its expected cash flow of $21.40 a share. The $4.00 dividend yields 3.4%.
In the latest edition of Wall Street Stock Forecaster, we look at the outlook for oil and gas prices—and the effect of increasing shale output—in a global economy still recovering from recession. We also examine the impact of Chevron’s big new Australian projects on the company’s financial outlook. We conclude with our clear buy-hold-sell advice on the stock.
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The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
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