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Chevron (CVX) Outlines Capital Spending & Investment Plans

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Chevron Corporation (CVX - Free Report) recently drafted a plan wherein it will maintain disciplined spending, double its targeted savings from its Noble Energy deal and set new carbon intensity reduction goals.

For the 2021-2025 period, Chevron reiterated its organic capital and exploratory expenditure guidance, which is projected in the $14-$16 billion range. Further, it doubled its initial estimate of Noble synergies to $600 million, which will lead to an anticipated 2021 operating cost reduction of 10% from the 2019 levels.

Over the next five years, Chevron foresees an investment boost in various lucrative assets including the prolific Permian Basin of Texas and New Mexico where output could reach one million barrel a day as expenses of its major expansion in Kazakhstan are expected to alleviate.

Beating its 2023 upstream carbon intensity reduction targets three years ahead of time, Chevron now aims at a 35% cut in its carbon intensity by 2028 and estimates to eliminate routine flaring by 2030. 

This strategic move takes place when most energy super majors like BP Plc (BP - Free Report) and ExxonMobil (XOM - Free Report) were dealing with continuous pressure from investors to lower emissions, devote more resources and time toward generating low-carbon energy and explain the impact of their fossil fuel production on climate change.

The currently Zacks Rank #3 (Hold) Chevron also made a Series C investment in Blue Planet Systems Corporation earlier this year. In addition, it signed a letter of intent with Blue Planet regarding cooperation on pilot projects and other commercial opportunities at prime geographic locations with the purpose of jointly developing lower-carbon prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, alongside its environmental efforts, the company remains focused on increasing sustainable free cash flow and boosting its shareholder returns in the long run.

Chevron’s capital-efficient investment plan and cost-effective measure is expected to double its return-on-capital employed. This, in turn, will likely lead to free cash flow growth of more than 10% and a budget as low as $14 billion per year through 2025.

Chevron CFO Pierre Breber believes that “The path to increase return on capital employed is straightforward — invest in only the highest-return projects and operate cost efficiently”. 

Also, recently, Chevron entered into an agreement with Noble Midstream Partners LP to obtain the latter’s remaining outstanding assets in an all-stock deal.

The contract was announced within six months of Chevron’s acquisition of Noble Energy, Inc, the parent organization of the master limited partnership (MLP). This transaction is considered last year’s one of the biggest deal wins in the oil industry. It is scheduled to be completed in the second quarter of 2021 and is subject to customary approvals.

Company Profile

Chevron is one of the largest publicly traded oil and gas companies in the world with operations spread to almost every corner of the globe. This San Ramon, CA-based company is fully integrated, which is indicative of its participation in every energy-related aspect, right from oil production to refining and marketing.

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