{"id":5331,"date":"2023-11-01T04:58:31","date_gmt":"2023-11-01T04:58:31","guid":{"rendered":"https:\/\/connectwithfund.com\/investment\/chevrons-global-ambitions-are-hitting-expensive-snags\/"},"modified":"2023-11-01T04:58:32","modified_gmt":"2023-11-01T04:58:32","slug":"chevrons-global-ambitions-are-hitting-expensive-snags","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=5331","title":{"rendered":"Chevron\u2019s Global Ambitions Are Hitting Expensive Snags"},"content":{"rendered":"
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\n Chevron
\n is expanding around the world, looking to boost oil and gas production by drilling in a growing list of countries from Australia to Venezuela to Guyana to Kazakhstan and Israel. But those ambitions are increasingly running up against challenges, be they geopolitical, geological, or labor-related.<\/p>\n

On Friday, Chevron stock fell 6.7% after the company reported disappointing earnings that missed Wall Street\u2019s expectations by 18%. At $144, Chevron stock is down 17% this year, versus a 1% drop for
\n Exxon Mobil
\n (XOM). Exxon has had fewer operational hiccups than Chevron, and investors have generally been more positive about its M&A strategy.<\/p>\n

\n

On Friday, Chevron said it was experiencing costly delays at a major oil reservoir in Kazakhstan known as Tengiz. CEO Mike Wirth said on an earnings call that the company, which is exploring the reservoir as part of a joint venture, now expects to receive lower production and dividends from the project in the near term\u2014forcing it to spend more and make less.<\/p>\n

\u201cCash flow from the operations will be lower by about $1.5 billion at $60 Brent [crude prices] in total over the next two years really due to the delay in the project,\u201d Wirth said. He added that the company expects to receive $2.5 billion less in dividends from the project in 2024 and 2025 than it had initially anticipated.<\/p>\n

Chevron\u2019s explanation was \u201cperhaps not a great defense as large international oil companies are meant to be good at doing big projects,\u201d wrote Citi analyst Alastair Syme.<\/p>\n

Chevron has also had issues at other projects\u2014some of which it can control and some of which it can\u2019t. In Australia, workers on a major natural-gas project have held strikes over contract issues, though the company said on Monday that the contract issues have been resolved.<\/p>\n

In Venezuela, Chevron has successfully restarted production over the past year as the U.S. has lifted sanctions on oil exports. But the most recent sanctions relief is unlikely to help the company\u2014though it might help its competitors, Wirth said. \u201cThe recent action in the new general license issued by OFAC [Office of Foreign Assets Control] really opens up operating room for others more so than it does for us,\u201d he said.<\/p>\n

And a Chevron natural-gas project in Israel was shut in after the war between Israel and Hamas began earlier this month. That\u2019s not something Chevron can control, but it does show the difficulties of operating in so many locations.<\/p>\n

The challenges overseas point to the risks of Chevron\u2019s ambitions. For the past two years, Chevron had been focused on increasing cash flow from proven oil wells and buying back stock\u2014activities that investors can usually count on to lift the stock. Now the company is intent on growing production, particularly through its planned acquisition of
\n Hess
\n (HES), which has a major project off Guyana. The Hess deal was more expensive on a price-to-earnings basis than other recent deals in energy, because the company has better growth prospects than peers. But that means there will be increasing attention on Chevron\u2019s ability to navigate these kinds of complicated projects.\u00a0Delays could have an outsize impact on the stock.<\/p>\n

That said, at least one analyst thinks Chevron stock looks attractive after the drop, and doesn\u2019t think Wirth is to blame for the Kazakhstan stumbles. Bank of America analyst Doug Leggate wrote that those troubles are \u201clegacy operating challenges\u201d that shouldn\u2019t be pinned on the current CEO. Leggate upgraded the stock to Buy from Neutral and raised his price target to $200 from $190.<\/p>\n

He thinks that the Hess deal makes Chevron more attractive.<\/p>\n

\u201cAssuming the potential deal closes on the agreed terms any rational assessment of what drives recognition of value concludes Chevron investment case has been reset by favorable rate of change on growth,
dividend capacity and portfolio depth,\u201d he wrote.<\/p>\n

Write to Avi Salzman at avi.salzman@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Chevron is expanding around the world, looking to boost oil and gas production by drilling in a growing list of countries from Australia to Venezuela to Guyana to Kazakhstan and Israel. But those ambitions are increasingly running up against challenges, be they geopolitical, geological, or labor-related. On Friday, Chevron stock fell 6.7% after the company reported disappointing earnings that missed Wall Street\u2019s expectations by 18%. At $144, Chevron stock is down 17% this year, versus a 1% drop for Exxon Mobil (XOM). Exxon has had fewer operational hiccups than Chevron, and investors have generally been more positive about its M&A<\/p>\n","protected":false},"author":1,"featured_media":5332,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40],"tags":[],"class_list":["post-5331","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investment"],"yoast_head":"\nChevron\u2019s Global Ambitions Are Hitting Expensive Snags | ConnectWithFund<\/title>\n<meta name=\"description\" content=\"Chevron is expanding around the world, looking to boost oil and gas production by drilling in a growing list of countries from Australia to Venezuela to\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/connectwithfund.com\/?p=5331\" \/>\n<meta property=\"og:locale\" content=\"en_US\" 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