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Chevron (CVX) Divests Argentine Assets to President Energy

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Integrated energy company, Chevron Corporation (CVX - Free Report) recently divested its whole operating interest in oil producing assets at Puesto Flores and Estancia Vieja in the Neuquen Basin, Argentina to an upstream energy company, President Energy PLC.

Deal Details

Per the deal, Chevron received $400,000 from President Energy. The acquirer will pay $15 million and an additional $7 million by 2018 to the Rio Nego Province, where the basin is located. The deal will be closed by the end of September 2017. Till then, Chevron will manage the assets on behalf of President Energy.

The assets in Argentina have production capacity of more than 1,300 barrels of oil per day. The assets sold by Chevron have the capacity to generate positive cash flow of $1 million per month. Chevron has owned the assets for the last 15 years.

Other major players operating in the Neuquen Basin are Dutch integrated Royal Dutch Shell plc , U.S. oil mammoth ExxonMobil Corporation (XOM - Free Report) and France's Total S.A. .

Deal Rationale

The deal is in line with Chevron’s last year’s plan to divest $10 billion assets during 2016-17. This will enable the company to focus on its deepwater assets. The divestment plan is part of the company’s strategy to increase its cash margin. Chevron has plans to generate a total of $400 million from divestments in the second quarter of 2017.

Chevron's divestment plans of lower margin barrels include assets in Bangladesh, Canada, South Africa, Gulf of Mexico and Indonesia. Among these, sales and purchase agreements have already been signed for Bangladesh, Canada downstream and South Africa. The Indonesian properties brought $2.1 billion to the company.

About the Company and Zacks Rank

San Ramon, CA-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. Chevron, in its present form, resulted from the 2001 merger between Texaco and Chevron Corporation. The company’s operations are divided into two main segments: Upstream and Downstream.

Chevron is one of the largest integrated energy players in the world. The company’s oil and gas development project pipeline is among the best in the industry. However, with deficits in its operating cash flow, the company has to look for other avenues like asset sales to meet the shortfall.

Chevron presently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Chevron has lost 0.4% of its value year to date compared with 0.6% fall of its industry.

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