Why You Should Buy Chevron Ahead Of Earnings
Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Chevron (NYSE: CVX) is one of the most reliable assets on the market. This is a dependable, integrated energy firm that shareholders should hold for the long-term. Interested investors should buy now and manage this as a defensive asset that will steadily yield capital appreciation and increase dividends for the foreseeable future. Chevron consistently expands its global portfolio while employing sophisticated technologies in order to maintain its leadership position and out-pace competing E&P and energy firms. The company persists as a pioneer in the industry, valued fairly at a premium price. Chevron invests effectively to ensure substantial growth and prominence in the long-term.
Chevron makes fundamentally low-risk, high-reward investments to propel its long-term growth. Early in July, Chevron released an interim report that indicated its downstream earnings for 2Q12 are going to be better than initial expectations. This is mostly due to improved refining margins and gains on asset sales. Its U.S. net oil-equivalent production increased 14,000 barrels per day in line with increased production in the Gulf of Mexico. In comparison to 1Q12, international refinery crude-input volumes increased 74,000 barrels per day due to the completion of maintenance on refineries in South Korea and South Africa. Production in Nigeria also increased. Based on these figures, I think Chevron will report higher than expected earnings next week.
Chevron also announced a long-term contract with Pacific Drilling (NYSE: PACD) at the end of June 2012. This is a contract to use Pacific Drilling's deep-water drill ship for five years in the Gulf of Mexico. The ship will be delivered in 4Q12; this is the third ship Chevron has contracted from Pacific Drilling since August of 2011, bringing the total to $3.2 billion as of June. Slowly but surely, with the aid of technology and innovation, America is entering the supply and export side of the energy market, opposed to being chiefly a consumer and importer. Chevron will benefit from this greatly by being one of the foremost globally integrated energy firms alongside Exxon Mobil (NYSE: XOM). Oil production supply levels in North America are at their highest since 1999, causing refinery operations to cease in emerging markets in the east and in Europe as well due to the decrease in U.S demand. As an example, ConocoPhillips (NYSE: COP) purchased Marathon Oil's (MRO) 30% stake in an Alaskan plant for full ownership. ConocoPhillips is now sending five to six shipments of LNG to Japan throughout the year. Advancements in shale technologies and analytics and alternative fuels are creating a number of opportunities for energy firms like Chevron.
Chevron has less debt than most of its competition and is aggressively pursuing technological solutions and new territories to bolster its strong portfolio. Chevron is revolutionizing the industry by employing its "i-field" in six to eight data control centers worldwide. This new "intelligent field" operation will deploy technology and communication tools and use analytics in order to increase the yield from its various drilling sites and asset plays around the world. Chevron will use sophisticated technologies and algorithms to monitor and manage its costs and systems across six continents through centralized platforms. Sensors will track and transmit the data back to the control stations in order to maximize each asset's true potential. This system will continue to evolve in order to improve efficiency in all of Chevron's investments. The firm also recently negotiated to sell an additional 400,000 tons of LNG, a 10 percent interest in field licenses, and an 8 percent stake in processing facilities to the Tokyo Electric Power Company, which is involved in the lucrative Wheatstone project. Furthermore, Chevron is working towards becoming the leading LNG producer in Australia through its $37 billion Gorgon project, estimated to yield 15 mtpa by 2014.
Chevron has a 50 percent stake in an offshore Suriname drilling site. In addition, Chevron may benefit greatly from the potential expansion of the petroleum pipeline network in Canada. Chevron is also working on developing the first ethylene plant in 10 years; finishing first would give it a significant advantage in the labor market over Exxon. It is currently analyzing the potential yield in shale fields throughout Eastern Europe as well. And, lastly, it is working on its Rosebank project off the shore of the U.K. to recover a potential 240 million barrels in undeveloped oil and gas resources. Chevron is doing all this while running effective PR campaigns on the airwaves to support math and science education for the nation's youth. This firm is unyielding in its pursuit of global prominence. I think this stock will surprise investors with higher than expected earnings next week. For shareholders and investors that can afford it, this is a reliable and defensive asset for any type of investment portfolio.
jordobivona has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
