Chevron: 12th Offshore Aussie Discovery

Global integrated energy company Chevron Corp. (CVX - Analyst Report) announced the discovery of natural gas in Vos-1 well, offshore Western Australia, marking its twelfth offshore find in the country since mid-2009.

Located in the WA-439-P permit block in the Carnarvon Basin, the well is estimated to hold approximately 453 feet of net gas pay. The well, about 186 miles from Exmouth on the Western Australian coast, was drilled in 4869 feet of water to a depth of 12,461 feet.

The Australian unit of Chevron acts as the operator of the block with 50% interest, while the remaining stake is controlled by Shell Development (Australia) Pty Ltd – an affiliate of Royal Dutch Shell plc (RDS.A - Analyst Report).

We believe this exploration success will boost Chevron’s prospects in Australia by adding to its already significant gas interests in the country. The company is heavily involved with two multi-billion liquefied natural gas (LNG) projects – Wheatstone and Gorgon.

Located about 124 miles north of Onslow, off Western Australia’s Pilbara coast, the Wheatstone venture is proposed to be built with an annual output capacity of 25 million metric tons of LNG. The venture will have an initial annual capacity of 8.9 million metric tons of LNG, with the first shipment expected in 2016.

The Gorgon gas fields, off the coast of Western Australia, are estimated to contain 40 trillion cubic feet of gas deposits with an expected economic life of at least 40 years from the time of start-up. Chevron has said that the venture will have an annual capacity to produce 15 million tons of LNG, with the first shipment expected in 2014.

We believe that continuous successful drilling activities along with these prominent projects will confer Chevron a leadership position among natural gas and LNG suppliers in the Asia-Pacific belt.

San Ramon, California-based Chevron is the second-largest U.S. oil company by market value after ExxonMobil. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.

Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

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