CHEVRON CORP. $125 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $237.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 3.2%; TSINetwork Rating: Above Average; 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.

At the end of 2013, Chevron’s proven reserves totaled 11.2 billion barrels of oil equivalent (57% oil and 43% natural gas). Based on its average 2013 production of 2.6 million barrels a day, that would last 11.8 years.

Chevron’s production has remained steady over the past few years, but oil prices jumped 70% while gas went through a slump. That’s why the company’s revenue rose 40.9%, from $171.6 billion in 2009 to $241.9 billion in 2012. Revenue fell 5.4% in 2013, to $228.8 billion, mainly due to a slight dip in oil prices.

Earnings soared from $5.24 a share (or a total of $10.5 billion) in 2009 to $13.32 a share (or $26.2 billion) in 2012. However, earnings fell to $11.09 a share (or $21.4 billion) in 2013.

Cash flow per share increased from $11.26 in 2009 to $20.34 in 2012, but fell to $18.43 in 2013.

Huge new project getting closer

Chevron continues to spend heavily on new projects and replacing its reserves: in 2013, it devoted $41.9 billion to exploration and upgrading its operations, up 22.5% from $34.2 billion in 2012.

About 90% of its 2013 spending went toward new oil and gas projects, the biggest of which is the Gorgon gas field off Australia’s northwest coast. In addition to developing the field, Chevron is building a liquefied natural gas (LNG) plant that will convert the gas into a liquid for shipment to customers in Asia.

Chevron owns 47.3% of Gorgon and will operate it when it starts up in mid-2015. The project is now 75% complete and will cost $54 billion (Chevron’s share is $25.5 billion). Gorgon’s reserves should last 40 years.

The company is applying its experience from Gorgon to its 64.14%-owned Wheatstone project, which includes an LNG facility on Australia’s west coast. About 80% of this plant’s gas will come from an offshore field; Chevron owns 80.17% of the joint venture that will build and operate the platforms and supply lines.

Wheatstone is 25% complete. It should start up in 2016 and last 30 years. Chevron’s share of the $29-billion cost is $18.6 billion.

In 2013, Chevron bought 50% of a proposed terminal in Kitimat, B.C., that would export LNG to customers in Asia. The deal includes related pipelines and gas properties in the province. This project is still in the design stage, so Chevron hasn’t said how much it would cost or when it would begin operating.

Later this year, the company will start up its Jack (50% owned) and St. Malo (51% owned) offshore oil fields in the Gulf of Mexico. These projects will cost a total of $7.5 billion, but their reserves should last 30 years.

Refinery upgrades come at a key time

Chevron has also earmarked $3.1 billion for refinery improvements this year. These outlays should make these operations more profitable, particularly in light of the fact that they have had to pay higher prices for crude oil.

The company’s strong balance sheet will help it fund these investments. As of December 31, 2013, its long-term debt was $18.3 billion, or a low 8% of its market cap. The company also held cash of $16.5 billion, or $8.63 a share.

Chevron continues to fight a class-action lawsuit stemming from its 2001 purchase of rival oil company Texaco in 2001. The lawsuit accuses Texaco of failing to clean up oil wells it drilled as part of a partnership with Ecuador’s state-owned oil company.

In 2011, an Ecuadorean court ordered Chevron to pay $19 billion, but a higher court later cut that to $9.5 billion. The company has few assets in Ecuador, so the residents are suing it in other countries.

However, a U.S. judge recently ruled that the lawyer representing residents of the affected areas used bribes and other corrupt means to sway Ecuadorean judges. That makes it less likely that Chevron will have to pay any damages.

Slower first-quarter production will probably cut Chevron’s 2014 earnings to $10.91 a share. The stock trades at a low 11.5 times that forecast. It also trades at just 7.1 times the company’s likely 2014 cash flow of $17.50 a share.

More dividend hikes on tap

The company’s earnings and cash flow should rebound strongly over the next few years as its new projects start up. That will give it more room to raise its $4.00-a-share dividend, which yields 3.2%. Chevron has increased its payout annually for 26 consecutive years.

Chevron is a buy.