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Factors That Make Chevron (CVX) an Enticing Investment Pick

Nilanjan Banerjee

We are upbeat about Chevron Corporation’s CVX prospects and believe it is a promising pick right now.

The company currently carries a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.    

Let’s take a look at the other factors that make this integrated energy major an attractive bet.

Strong Permian Focus

The energy major expects its resource potential in the Permian — the most prolific basin in the United States — to jump from 9.3 billion barrel of oil equivalent (BBoE) in 2017 to 16.2 BBoE in 2019. Over the time frame, Chevron expects its portfolio value of its unconventional resources in the Permian to double.

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Notably, in the March quarter of 2019, the company produced 391 thousand barrel of oil equivalent per day (MBoE/D) from the Permian, reflecting an increase of 139 MBoE/D from a year ago. In fact, Chevron is planning to produce 900 MBoE/D by 2023 from the basin through 20 rigs.

Attractive Dividend

Chevron is a dividend aristocrat and has raised its dividend for 32 years in a row. This makes this stock attractive for dividend-hungry investors.

Chevron also had a $4-billion share buyback program in place. The company has decided to increase the repurchase program to $5 billion by utilizing the $1 billion of cash termination fee it received from the failed acquisition of Anadarko Petroleum Corp. APC. This reflects the company’s strong commitment to returning capital to stock holders.

Robust Financials

The company has an industry-leading balance sheet with a net debt ratio of 13.5%, the lowest among other energy majors like BP plc BP, Royal Dutch Shell plc RDS.A, TOTAL SA TOT and Exxon Mobil Corp. XOM.

Moreover, to remain cashflow neutral — for maintaining the same net debt position at year-end as at the beginning of the year — the required Brent crude oil price for Chevron is $51 a barrel, which is the lowest among oil majors, as per the company’s investor presentation.

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TOTAL S.A. (TOT) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
 
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