Profits Await You at Chevron
You've watched during the past year as crude prices have amazingly meandered in a relatively narrow band between $95 and $100 for a barrel of West Texas Intermediate. Concurrently, as you've heard repeatedly, natural gas prices have headed consistently lower, before recovering somewhat during our hot, dry summer.
Somewhat as a result, the oil and gas producers, whose shares have hardly been moribund, nevertheless have drawn figurative yawns from some investors since mid-2011. This, even as Chevron's (NYS: CVX) share price has climbed by 23% from its low last fall, while ExxonMobil's (NYS: XOM) shares rose by 26%. And then there's my medium-sized favorite, which I've dangled in front of Fools repeatedly: Oil-weighted EOG Resources (NYS: EOG) shares have catapulted by nearly 60% in the past year.
Is it too late?
So what's a Fool to do? Should we turn away from the energy producers, assuming that we dozed and missed the proverbial boat? Hardly.
Think about this: Oil has remained in a steady price range, and many producers' shares have climbed, despite a global economic slowdown and Middle Eastern geopolitics that are far more of a tinderbox than generally is recognized. Where is crude likely to elevate to in the event of an outbreak of hostilities involving Iran, Turkey, Israel, or other players in the biggest oil-producing region, or perhaps given an economic pickup across much of the world?
The answer is self-evident, and for that reason alone, I continue to believe that a well-structured Foolish portfolio should include energy names. I know, I know, I've been advocating oil-field services kingpinSchlumberger (NYS: SLB) , along withNational Oilwell Varco (NYS: NOV) , for their geographic spreads, solid managements, and technological leadership as ideal energy plays.
Watch the company on the Left Coast
But I also believe that the game is hardly over for Chevron, the second-biggest of the U.S.-based member of Big Oil, which sports an impressive geographic spread and tip-top managerial complement of its own. Beyond that, it's balance sheet is built like my Tennessee Volunteers' new 6-foot-7, 370-pound middle guard.
Let's look at the range of venues in which Chevron is operating. For starters, there's the Gulf of Mexico, where the company is diligently expanding its production in its big Tahiti field, 190 miles from New Orleans. Within the next couple of years, two other Chevron ultra-deepwater fields, Big Foot and Jack/St. Malo, will begin to add to the company's Gulf crude output. Further, during the second half of last year, the company announced another promising discovery in nearly 6,800 feet of water at its Moccasin play.
Chevron is involved in some unconventional gas operations in the U.S., largely in the Marcellus Shale of the Northeast. That venture became part of the company's repertoire with its acquisition of Atlas Energy nearly two years ago. For perspective, however, the $3.2 billion that the California company shelled out for Atlas came to about a tenth the amount that ExxonMobil paid for much larger XTO Energy, which quickly moved Exxon to the top of U.S. gas producers. Specifically, natural gas now constitutes 47% of Exxon's total production, versus just 31% for Chevron.
Our world tour of Chevron's activities would also take us to, among other spots, its unconventional shale drilling in Poland and to the Partitioned Zone between Saudi Arabia and Kuwait -- where it's the only major working upstream with Saudi Aramco. We'd then move on to Australia, where it is the major domo of a pair of massive liquefied natural gas projects, called Gorgon and Wheatstone, respectively. And then there's its ownership interests in Canadian tar sands assets, along with a stake in Russia's Caspian Pipeline Consortium and in other exploration and production assets in that country.
Now here's a real solar success
That doesn't cover the worldwide waterfront -- or the onshore, for that matter -- for Chevron's efforts. But I think it's important for Fools to realize that the company is hardly leaving "clean" energy development to lost causes like Solyndra. Indeed, Chevron is the world's biggest producer of geothermal energy, which is obtained from the heat of the earth.
And as it relates to semi-sexy solar, the company is one of the major installers of solar systems in education institutions. Its solar success stories include systems now operating in the South San Francisco Unified School District, the Contra Costa Community College District in San Francisco's East Bay, and the Los Angeles County Metropolitan Transportation Authority.
And then there's that muscular balance sheet, which makes the company even more compelling. Its cash hoard now amounts to about $21 billion, an $11 billion surplus over its debt and an 18% advantage over its larger rival, Exxon. There are those who suspect that, as I can regularly see in my spouse's eyes, a shopping trip is in the offing at the company.
That's happened before. In years past, the former Standard Oil Company of California has picked off the likes of Texaco, Gulf, and Unocal. But it also may be that CEO John Watson and his minions are prudently salting away a stash to make its vast impending expenses in the development of its Australian LNG projects less painful.
The Foolish bottom line
So there you have it -- a member of Big Oil with a myriad of compelling properties, a prudent group at the top, and lots of dry powder. You owe it to yourself and your portfolio to add Chevron to My Watchlist.
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The article Profits Await You at Chevron originally appeared on Fool.com.The Motley Fool owns shares of ExxonMobil and National Oilwell Varco.Motley Fool newsletter serviceshave recommended buying shares of Chevron and National Oilwell Varco. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.The Motley Fool has adisclosure policy.
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