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U.S. oil major Chevron Corporation (CVX - Analyst Report) announced the discovery of oil at Coronado prospect, located in the Gulf of Mexico. The Walker Ridge Block 98 Well No. 1 well – situated roughly 190 miles off the Louisiana coast, in water depth of around 6,127 feet – has been drilled to a depth of 31,866 feet.

Chevron added that it is currently appraising the oilfield to determine the scale of reserves and its commercial viability.  

Chevron holds 40% operating interest in the prospect, with ConocoPhillips (COP - Analyst Report), Venari Offshore LLC and an affiliate of Anadarko Petroleum Corporation (APC - Analyst Report) controlling 35%, 10% and 15% interest, respectively.

We believe that Chevron’s latest exploration success will boost the company’s growth prospects in Gulf of Mexico by adding to its already significant line up of projects in the region’s prolific Lower Tertiary Trend.

As one of the largest lease holders in the Gulf of Mexico, Chevron is also developing Jack/St. Malo and Big Foot oil field projects. The developments are expected to commence production in 2014.

San Ramon, California-based Chevron is one of the largest publicly traded oil and gas companies in the world, based on proved reserves. It 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 divides its operations into three main segments: Exploration and Production; Manufacturing, Products, and Transportation; and Other Businesses.

Chevron is one of the largest integrated energy companies in the world and has an impressive business model. Its current oil and gas development project pipeline is among the best in the industry, boasting large multi-year projects.

However, being one of the largest integrated oil and gas companies in the world, Chevron is susceptible to the downside risk from the continued weakness in the global economy. We are also concerned about the company’s high capital spending, which may result in reduced returns going forward.

Chevron currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.    

One firm in the energy sector that is expected to significantly outperform the equity markets in the next one to three months is Helmerich & Payne Inc (HP - Analyst Report). The stock carries a Zacks Rank #1 (Strong Buy).  

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