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Chevron Asia Pacific Exploration and Production Company, an Australian subsidiary of the U.S. energy behemoth, Chevron Corporation (CVX - Analyst Report), has acquired full operating interest in two blocks located in the deepwater Bight Basin, 275 miles west of Port Lincoln, off the coast of South Australia.

The offshore blocks S12-2 and S12-3 are spread over 8 million acres. The acquisition is expected to add value to the company’s portfolio, with more exploration opportunities in Australia. The move is in line with the integrated supermajor’s plans of expanding its asset base.

San Ramon, CA-based Chevron is one of the largest publicly traded oil and gas companies in the world. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.

However, Chevron’s earnings do not look pretty. Last quarter, the company failed to beat the Zacks Consensus Estimate. We expect this negative trend to continue when the company reports its third quarter earnings on Nov 1.

Earlier this month, the company released a pre-earnings update which supports our view. Per the interim update, Chevron expects third quarter earnings to deteriorate from the previous quarter. In the upstream activities, the update is slightly bullish with oil production expected to be more the previous quarter. On the flip side, the downstream sector outlook is negative as the company expects substantially lower operating results than the last quarter.

Chevron currently holds a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

However, not all stocks in the energy sector have such gloomy outlook. One can consider Stone Energy Corp. (SGY - Analyst Report), Seadrill Partners LLC (SDLP - Snapshot Report) and Linn Energy, LLC (LINE - Snapshot Report) as good investment options. These stocks currently hold a Zacks Rank #1 (Strong Buy) and are expected to significantly outperform the market in the near term.

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