Chevron News, Chevron Texaco News
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With high leverage to the elevated crude prices and a low valuation, Chevron appears to be a good investment option.
With high leverage to the elevated crude prices and a low valuation, Chevron appears to be a good investment option.
August 6, 2008 – Crude prices have not been in double digits for the past several months on account of geopolitical factors, speculation, inflation and a downturn in the US dollar. Most analysts and experts expect prices to remain comfortably above $100 per barrel this year. Despite this, demand has not eased, given the limited energy alternatives available. According to the Consumer Federation of America, while increased domestic drilling may or may not help consumers, it would certainly help oil majors. Companies such as Chevron (CVX) and Exxon-Mobil (XOM) could continue to profit by trading the domestic oil at global prices.
UBS, which had upgraded Chevron from neutral to buy in mid-May, said it expects crude oil prices to “steadily rise over the next four years” and “take the earnings of major oil companies along for the ride.” UBS had added in its report to investors that it expects Chevron’s production growth to rebound in the second half of 2008, following “years of delivering disappointing organic-production declines.” Chevron plans to commence pumping crude from its Brazilian offshore project early next year. Moreover, the company has plans to ramp up its new Agbami field in Nigeria. The new 250,000-boe/d field, in which Chevron has a 68% share, is expected to achieve maximum output by the end of 2009.
The second-largest US oil company reported record earnings for the second quarter of 2008. Net income surged 11% to $6.0 billion, or $2.90 per diluted share, from $5.4 billion, or $2.52 per diluted share, in the second quarter of 2007. Net income for the first half of 2008 grew to $11.1 billion, or $5.38 per diluted share, from $10.1 billion, or $4.70 per diluted share, in the same period a year earlier. Strong oil and natural gas prices supported the company’s earnings.
Chevron’s Executive Vice President of Strategy and Planning, John Watson, had said at the 2008 World Petroleum Conference that the company’s planned capital and exploratory spending was up 15% to $22.9 billion. The investments would be made across various segments and operations of the company.
At the current prices, Chevron’s stock offers a dividend yield that is higher than that offered by rival Exxon-Mobil. Chevron’s production growth prospects are bright and the company is poised to continue to benefit from elevated oil prices. The PEG ratio is at 0.53. The company’s shares have plummeted since end-May, when they hit a 52-week high of $104.63. The company’s stock is currently trading at a price lower than its historical average.
Alternatio Cirqui, EconomyWatch.com Energy Correspondent
