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Chevron (CVX) Resumes Drilling Operations in Venezuela
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Chevron Corporation (CVX - Free Report) restarted drilling operations in a pristine field located in Venezuela, marking a significant move to boost production amid challenging geopolitical circumstances. The drilling activities, initiated in mid-February, aim to exploit the heavy crude area of the Orinoco Belt, which is CVX's primary avenue for increasing production in Venezuela.
Strategic Importance of the Orinoco Belt
Situated in the Orinoco Belt, the targeted area represents CVX's most promising opportunity for near-term production escalation within Venezuela. With the company's other operational fields anticipated to face declining output in the foreseeable future, the Orinoco Belt emerges as a key focal point for sustaining and potentially enhancing CVX's presence in the country.
Ambitious Drilling Plans
Chevron's plan covers the drilling of up to 30 new wells by 2025, signaling a robust commitment to expanding operations in Venezuela. This ambitious task is projected to substantially raise the overall production capacity of CVX's jointly managed ventures with the state-owned oil company, Petroleos de Venezuela SA (PDVSA), by 35%, culminating in an estimated daily output of 250,000 barrels by 2025.
Regulatory Considerations
The resumption of drilling activities has been facilitated by a license issued to CVX by the U.S. Treasury in 2022. This regulatory clearance assumes paramount significance amid heightened fears regarding the potential reinstatement of sanctions against Venezuela.
Despite growing political dynamics and uncertainties surrounding the Maduro regime, the license affords Chevron a degree of protection, enabling the company to pursue production increases while adhering to prescribed limitations on field expansion.
Operational Focus: Petroindependencia Field
Chevron's operational activities are primarily concentrated within the Petroindependencia field, situated in the expansive plains of the Orinoco Belt. Renowned as the world's largest repository of extra-heavy oil reserves, this field offers immense potential for scalable production.
Chevron's strategic shifting includes plans to deploy a second drilling rig at the site in July, highlighting the company's commitment to tapping the region's untapped resources.
Infrastructure and Workforce Deployment
In alignment with its operational expansion initiatives, CVX has undertaken significant infrastructural and logistical preparations. Administrative personnel have been relocated to proximate urban centers to streamline operational oversight, while essential service providers such as Weatherford International Plc. have been engaged to support drilling activities. These concerted efforts highlight Chevron's comprehensive approach toward optimizing operational efficiency and maximizing output potential.
Market Implications and Export Dynamics
The resurgence of drilling activities in Venezuela holds profound implications for global oil markets, particularly in the context of heightened US scrutiny and sanctions. Despite prevailing geopolitical challenges, Venezuela's oil exports to the United States have witnessed a notable upsurge, with February 2024 recording the highest daily export volume since the issuance of Chevron's operating license in November 2022. However, the current export levels remain below pre-sanction thresholds, indicative of ongoing market volatility and geopolitical uncertainties.
Conclusion
Chevron's resumption of drilling operations in Venezuela's Orinoco Belt highlights the company's strategic agility and commitment to navigating complex geopolitical terrain. By leveraging regulatory clearances and optimizing operational efficiencies, CVX aims to sustain and potentially enhance its production footprint within Venezuela while simultaneously addressing evolving market dynamics and regulatory imperatives. As the company progresses with its ambitious drilling agenda, close attention will be warranted to assess the evolving geopolitical landscape and its ramifications on global oil markets.
Zacks Rank & Stocks to Consider
Currently, CVX carries a Zacks Rank #5 (Strong Sell).
Murphy USA is valued at around $8.56 billion. In the past year, the company’s shares have surged 60.5%.
MUSA markets retail motor fuel products and convenience merchandise, operating retail stores under the brands Murphy USA, Murphy Express and QuickChek.
Energy Transfer is valued at $50.05 billion. The company currently pays a dividend of $1.26 per share, or 8.32%, on an annual basis.
ET is an independent energy company principally engaged in the acquisition, exploration, development and production of crude oil and natural gas.
Subsea 7 is valued at $4.56 billion. The company currently pays a dividend of 38 cents per share, or 2.56%, on an annual basis.
SUBCY offers offshore project services for the energy industry. It specializes in subsea field development and covers project management, design, engineering, procurement, fabrication, survey, installation and commissioning of seabed production facilities.
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Chevron (CVX) Resumes Drilling Operations in Venezuela
Chevron Corporation (CVX - Free Report) restarted drilling operations in a pristine field located in Venezuela, marking a significant move to boost production amid challenging geopolitical circumstances. The drilling activities, initiated in mid-February, aim to exploit the heavy crude area of the Orinoco Belt, which is CVX's primary avenue for increasing production in Venezuela.
Strategic Importance of the Orinoco Belt
Situated in the Orinoco Belt, the targeted area represents CVX's most promising opportunity for near-term production escalation within Venezuela. With the company's other operational fields anticipated to face declining output in the foreseeable future, the Orinoco Belt emerges as a key focal point for sustaining and potentially enhancing CVX's presence in the country.
Ambitious Drilling Plans
Chevron's plan covers the drilling of up to 30 new wells by 2025, signaling a robust commitment to expanding operations in Venezuela. This ambitious task is projected to substantially raise the overall production capacity of CVX's jointly managed ventures with the state-owned oil company, Petroleos de Venezuela SA (PDVSA), by 35%, culminating in an estimated daily output of 250,000 barrels by 2025.
Regulatory Considerations
The resumption of drilling activities has been facilitated by a license issued to CVX by the U.S. Treasury in 2022. This regulatory clearance assumes paramount significance amid heightened fears regarding the potential reinstatement of sanctions against Venezuela.
Despite growing political dynamics and uncertainties surrounding the Maduro regime, the license affords Chevron a degree of protection, enabling the company to pursue production increases while adhering to prescribed limitations on field expansion.
Operational Focus: Petroindependencia Field
Chevron's operational activities are primarily concentrated within the Petroindependencia field, situated in the expansive plains of the Orinoco Belt. Renowned as the world's largest repository of extra-heavy oil reserves, this field offers immense potential for scalable production.
Chevron's strategic shifting includes plans to deploy a second drilling rig at the site in July, highlighting the company's commitment to tapping the region's untapped resources.
Infrastructure and Workforce Deployment
In alignment with its operational expansion initiatives, CVX has undertaken significant infrastructural and logistical preparations. Administrative personnel have been relocated to proximate urban centers to streamline operational oversight, while essential service providers such as Weatherford International Plc. have been engaged to support drilling activities. These concerted efforts highlight Chevron's comprehensive approach toward optimizing operational efficiency and maximizing output potential.
Market Implications and Export Dynamics
The resurgence of drilling activities in Venezuela holds profound implications for global oil markets, particularly in the context of heightened US scrutiny and sanctions. Despite prevailing geopolitical challenges, Venezuela's oil exports to the United States have witnessed a notable upsurge, with February 2024 recording the highest daily export volume since the issuance of Chevron's operating license in November 2022. However, the current export levels remain below pre-sanction thresholds, indicative of ongoing market volatility and geopolitical uncertainties.
Conclusion
Chevron's resumption of drilling operations in Venezuela's Orinoco Belt highlights the company's strategic agility and commitment to navigating complex geopolitical terrain. By leveraging regulatory clearances and optimizing operational efficiencies, CVX aims to sustain and potentially enhance its production footprint within Venezuela while simultaneously addressing evolving market dynamics and regulatory imperatives. As the company progresses with its ambitious drilling agenda, close attention will be warranted to assess the evolving geopolitical landscape and its ramifications on global oil markets.
Zacks Rank & Stocks to Consider
Currently, CVX carries a Zacks Rank #5 (Strong Sell).
Investors interested in the energy sector might look at some better-ranked stocks like Murphy USA Inc. (MUSA - Free Report) and Energy Transfer LP (ET - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), and Subsea 7 S.A. (SUBCY - Free Report) , currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA is valued at around $8.56 billion. In the past year, the company’s shares have surged 60.5%.
MUSA markets retail motor fuel products and convenience merchandise, operating retail stores under the brands Murphy USA, Murphy Express and QuickChek.
Energy Transfer is valued at $50.05 billion. The company currently pays a dividend of $1.26 per share, or 8.32%, on an annual basis.
ET is an independent energy company principally engaged in the acquisition, exploration, development and production of crude oil and natural gas.
Subsea 7 is valued at $4.56 billion. The company currently pays a dividend of 38 cents per share, or 2.56%, on an annual basis.
SUBCY offers offshore project services for the energy industry. It specializes in subsea field development and covers project management, design, engineering, procurement, fabrication, survey, installation and commissioning of seabed production facilities.