Reject Market Fears and Buy Chevron Corporation (NYSE:CVX)


Chevron Corporation (NYSE:CVX) tumbled last month after the company said its production fell in the third quarter amid sales of assets and decline of wells in the US. Chevron’s production declined by 17,000 barrels per day. Chevron’s production failed to grow even after Gorgon LNG project in Australia and operations in Permian Basin in Texas and New Mexico. On sequential basis, Chevron’s production declined by 2.2%.

However, analysts think that Chevron Corporation (NYSE:CVX) fell as a result of an overreaction by the market. Chevron’s profits increased by a whopping 52% in the quarter while revenue in the quarter jumped 20%. In the first nine months of 2017, cash flow from operations also increased by 60% to reach $14.3 billion. Third quarter earnings missed estimates, but not by a huge margin. Production growth was still in-line with the annual guidance of 4% to 9% growth. The Wall Street also didn’t pay attention to the fact that Chevron lightened its debt load in the third quarter. The company’s debt in the quarter came in at $35.33 billion, down from $39.14 billion reported at the start of this year. In September, Chevron Corporation (NYSE:CVX) said its cash flows after dividends turned positive in the first half of 2017 for the first time after oil prices started plunging in 2014.

Chevron’s revenues are now improving steadily. Chevron Corporation (NYSE:CVX) is also poised to grow because of a bullish future of oil. Oil price is on its way to touch $60 after a long time as analysts believe that Saudi Arabia and other OPEC countries will keep cutting oil production. Oil price will also rise amid declines in the US crude inventories.

Growth Catalysts: Permian Basin, Gorgon

Permian Basin remains the focus of Chevron Corporation (NYSE:CVX), and the company will increase its production from this area in the future. Chevron Corporation (NYSE:CVX) management said during the third quarter earning call that production in the Permian Basin increased by 30% in the Q3 on year-over-year basis. Chevron is deploying new rigs and technologies in the region, which would catapult the production to 200,000 boe. Chevron’s Gorgon facility will also add up to the company’s production prowess. Gorgon facility started its operations in 2017. Its production stands at 400,000 boe per day. Chevron has also acquired and launched its first LNG unit of $34-billion Wheatstone LNG project. The unit was working at 65% capacity. In the fourth quarter, the unit will operate on full capacity. The second unit will start operations next year.

Earlier this month, Chevron Corporation (NYSE:CVX) announced a major project for Duvernay shale formation, showing the company is still bullish on Canada’s energy sector.

Read full web cast presentation:2017_3Q_Earnings_Call_Presentation

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