Chevron Global Energy Inc. — the wholly owned subsidiary of Chevron Corporation ( CVX - Analyst Report ) — has stepped into an exploration agreement with Hamilton, Bermuda based Kosmos Energy Ltd ( KOS - Snapshot Report ) . However, the financial terms of the deal were not disclosed.

Per the deal, Kosmos Energy handed 50% working interest in Blocks 42 and 45, offshore Suriname to Chevron. Kosmos Energy — that primarily operates in Africa and South America — will continue to act as the operator of the blocks till the exploration activity ends with the other 50% stake.

The deal includes the option of Chevron taking over as the operator of the venture, if the exploration shows successful results.

Located about 155 miles from the capital city, Paramaribo, and spanning over an area of about 2.8 million gross acres, the blocks are at water depths ranging between 650 feet and 8,500 feet. The companies plan to commence drilling in 2014.

Chevron management stated that this collaboration will broaden the company’s portfolio of assets in Latin America and will pave way for further exploration opportunities.

San Ramon, California-based Chevron is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.

The company, with an impressive business model, exhibits a pipeline of large, multi-year projects. Additionally, Chevron possesses one of the healthiest balance sheets among its peers, which helps it to capitalize on investment opportunities with the option to make attractive acquisitions.

Chevron’s strategic initiatives —aggressive cost reduction initiatives, exiting unprofitable markets and streamlining the organization —are expected to have long-term positive effects for the firm.

However, due to its integrated nature, Chevron is particularly susceptible to the downside risk from any weakness in the global economy. We are also concerned about business risks associated with operations in oversea areas, delays and cost overruns in various projects and the company’s high level of capital spending, which may result in reduced returns going forward.

As such, we see the stock performing in line with the broader market and maintain our long-term Neutral recommendation. Chevron currently retains a Zacks #3 Rank (short-term Hold rating).