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Chevron's (CVX) First Wheatstone Shipment Sets Sail for Japan

Integrated energy company Chevron Corporation’s CVX first shipment of liquefied natural gas (LNG) has recently left from its Wheatstone Project, located near Western Australia’s Onslow. Production in the Wheatstone project, Australia’s first third-party natural gas hub, started at the beginning of October.

Energy infrastructure provider, JERA Co., Inc., a foundation buyer of Chevron will receive the shipment and will be responsible for delivering the cargo to Japan. Chevron's LNG carrier, Asia Venture, will carry the shipment to its destination. 

Project Significance

The company has 64.14% operating interests in the $34-billion Wheatstone Project. Overall, the company has 80.2% interest in the offshore licenses containing the Wheatstone and Iago fields. The Wheatstone fields are estimated to contain over 4.5 trillion cubic feet of gas deposits. In addition, the project has the capacity to produce approximately 6% of total future LNG production in the Asia Pacific region. Also, Chevron shipping LNG to Japan shows the company's ability to address the rising demand for LNG in the Asia-Pacific region.

Another mega Australian LNG project of Chevron — Gorgon — initiated operations in March 2016 that has a shipment capacity of 15.6 million metric tons per annum. With these major projects starting production, Chevron expects an improvement in free cash flow. The projects are expected to drive long-term growth and boost shareholders’ value.  By 2020, the company aims to become a major LNG supplier.

About the Company

San Ramon, CA-based Chevron is one of the largest publicly traded oil and gas companies in the world, based on proved reserves. The company 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. Chevron’s operations are divided into two main segments: Upstream and Downstream.

In the third quarter, Chevron generated $5.4 billion in operating cash flow, while shelling out around $5.2 billion in capital expenditures and dividends. This led to around $200 million of excess cash flows, something that the company achieved for the first time since 2012. As a result of Chevron's focus on well planning and execution, the company continues to reduce its operating costs with underlying expenses, down almost 5% year to date compared with 2016. Cash capital expenditures for the first nine months of the year are also down 30%.

Price Performance

Chevron has lost 1.6% of its value year to date against the 2.6% growth of its industry.

 

Zacks Rank and Stocks to Consider

Chevron presently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Braskem S.A. BAK, Par Pacific Holdings, Inc. PARR and Northern Oil and Gas, Inc. NOG. Braskem and Par Pacific sport a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem’s 2017 earnings are expected to grow 12.1% year over year. The company delivered a positive earnings surprise of 68.5% in the second quarter of 2017.

Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered a positive average earnings surprise of 195.3% in the last four quarters.

Northern Oil and Gas’s sales for the third quarter of 2017 are expected to increase 9.6% year over year. The company delivered a positive average earnings surprise of 66.7% in the last four quarters.

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