Chevron Corporation (CVX - Free Report) is planning to leave the Makassar Strait gas block in Indonesia to shift its focus on more profitable opportunities in the area, per reports. The block is part of the Indonesia Deepwater Development (IDD) project, which is one of the biggest natural gas projects in the country.
The present contract for the block is set to expire in 2020 and Chevron decided to withdraw its extension proposal submitted in Jun 29. The company found the block uneconomical, which triggered the decision of excluding it from the project. The IDD project includes two more blocks, Rapak and Ganal, and their respective contracts are scheduled to expire in 2027 and 2028. China Petroleum & Chemical Corporation (SNP - Free Report) and Pertamina are partners of Chevron in the project.
Chevron had already decided to reduce its investment plans for the project, without affecting production targets. Investment in the project is expected to be reduced by more than 53% to $6 billion. Production from the project, however, is still expected to reach 1.1 billion cubic feet of natural gas along with 31,000 barrels of condensate a day. The project’s remaining plan includes the development of the Gendalo and Gehem gas hubs in the Rapak and Ganal blocks.
In a separate development, Chevron and energy major Royal Dutch Shell plc (RDS.A - Free Report) received waivers to the 25% U.S. steel tariffs. It marks the first exception for the oil and gas sector from the administration of President Donald Trump. Both Chevron and Shell use a specialty steel, which is not produced in the United States, for their operations. The waivers, which will keep the companies’ costs in check, will expire after a year. Notably, of more than 20,000 steel tariff exclusion requests received by the Commerce Department, 241 have been processed so far.
Zacks Rank and Another Stock to Consider
Currently, Chevron sports a Zacks Rank #1 (Strong Buy). Investors interested in the Energy sector can also opt for another top-ranked stock like BP p.l.c. (BP - Free Report) , sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
London-based BP is an integrated energy company. The company’s top line for 2018 is anticipated to improve 12.6% year over year, while its bottom line is expected to increase 77.7%.
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