Chevron CorporationCVX

Morningstar Rating

Stock Research and Analysis

by Allen Good

Chevron can no longer count on the high crude-oil prices that helped it post record profits. Now its ability to increase production and book reserves, which have become more elusive in recent years, will be a key driver for longer-term earnings power. Read more

Bulls Say

Investments in LNG projects around the world will allow the company to better exploit stranded resources.

Despite variance in short-term energy prices, long-term supply-and-demand factors should sustain a high price environment, resulting in returns in excess of capital costs.

Chevron is investing heavily in worldwide exploration projects, which should lead to reserves and production in the near future.

Significant ownership of refineries in Asia offers access to growth markets and offsets suffering U.S. refining margins. Read more

Bears Say

The company may find it increasingly difficult to boost production and book reserves as nations become more protective of their natural resources and are potentially averse to working with foreign energy companies.

Global economic weakness has reduced demand for refined products, negatively affecting refining profitability. Due to a large overhang of refining capacity, margins in the U.S. will likely remain thin even if the economy levels off or picks up a bit.

Chevron's recent success was the result of high commodity prices and refining margins that were unsustainable.

International expansion exposes the company to political risks. For example, Chevron's offshore facilities in Nigeria, previously thought immune from attacks because of their distance from the coast, have recently become susceptible to attacks by militants.

Ongoing legal action related to Chevron's now ceased Ecuadorian operations could result in a significant monetary judgment against the company. The case is likely to drag on for years, prolonging the uncertainty. Read more

Strategy

Chevron is not taking the declining production rates lightly, as it has aggressively set out to identify oil and gas assets that will deliver well into the future. Focus areas include deep-water projects Read more

Management

David O'Reilly is CEO and chairman, having been elevated to the position in 2000 from his role as vice chairman of the board responsible for worldwide exploration and production, where he served since 1998. O'Reilly's ascent to the top job caps a career Read more

Profile

Chevron is an integrated energy company with exploration, production, and refining operations worldwide. With production of 2.5 million of barrels of oil equivalent a day Read more

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Weekly Market Wrap: 1/29/2010
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