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Analysts say Chevron is on track with expectations

Chevron (ticker: CVX) held its analyst day this day, with analysts saying that Chevron is on track to meet expectations. The company released its 2015 budget ahead of this week’s analyst meeting, meaning there was few surprises during the presentation. Pavel Molchanov, an analyst at Raymond James Equity Research, said “In contrast to Exxon (ticker: XOM) – which hadn’t released a 2015 budget or production guidance until last week’s analyst meeting – there were no headline-grabbing announcements at Chevron’s meeting yesterday.” Raymond James listed CVX as its top buy among supermajors following the company’s 2014 analyst meeting.

CVX will cut its 2015 capital budget by about 13%, generally in line with its fellow supermajors and much less than the average of 34% in capital budget cuts from a total of 65 smaller companies compiled by EnerCom. The 2015 budget is set at $35 billion, with capital spending continuing to trend downward in the years to come. In 2017, Chevron expects to spend $30 billion, 14% below 2015 levels and 25% below its forecast in its 2014 analyst meeting. This is due in large part to LNG outlays winding down.

Growth estimates remain largely unchanged for the company, with 0% to 3% growth expected in 2015. Chevron reaffirmed its 2017 production forecast of 3.1 MMBOEPD. Any cash flow gaps are expected to be met with increased asset divestitures and borrowing.

Chevron’s full presentation can be found by clicking here.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication.

Analyst Commentary

Roger Read, Wells Fargo 03.11.2015
For now, we remain comfortable with our neutral view and Market Perform rating on Chevron. Not a lot of surprises from Chevron’s analyst day as production growth to 2017 was reaffirmed, key mega projects remain on schedule and cash flow gaps will be plugged by increased asset divestitures and borrowing. Beyond 2017, annual production growth rates may fall back to just 1%, but be augmented by improved cash margins and lower decline rate base production. Our 2015/2016 EPS estimates are unchanged. Our valuation range remains $104-111.

Pavel Molchanov, Raymond James 03.11.2015
In contrast to Exxon - which hadn't released a 2015 budget or production guidance until last week's analyst meeting - there were no headline-grabbing announcements at Chevron's meeting yesterday. Alongside some interesting operational tidbits, the main takeaways were an extension of the asset sale program into 2017, as well as added visibility on the production curve beyond 2017. Permian rig count and LNG outlays both decline slightly. As had been outlined alongside the 4Q14 results, Chevron is taking a relatively small hatchet to its 2015 capital spending, with a cut of 13%. The budget of $35 billion ($31 billion ex-affiliates) showed a surprising degree of resilience in U.S. upstream spending: $8.2 billion, down only 8% from last year's $8.9 billion. In the Permian, where Chevron is the #1 acreageholder (but not producer) with two million acres and has been much more vocal over the past year, the rig count is down modestly from 30 to 25. The expected 2015 well count is down more steeply, from 550 to 375, reflecting the fact that last year's program had mainly verticals, whereas now horizontals are predominant. Unusually for its peer group, Chevron even shared some IP rates: 1,300 Boe/d for horizontal wells with 7500-foot laterals in the Bradford Ranch Wolfcamp; 830 Boe/d with 4,600-foot laterals. On the other hand, the 2015 international upstream budget of $23.4 billion shows a steeper drop from $28.3 billion, mainly due to liquefied natural gas (LNG) project spending falling from $10 billion to $8 billion as Gorgon approaches completion in late 2015 and Wheatstone a year thereafter.

Baird 03.11.2015
CVX outlines strategic initiatives at Analyst Day. Yesterday morning Chevron Corp (CVX) hosted its 2015 Security Analyst Meeting at which it underscored its solid positioning to post peer-leading 20% production growth by 2017 driven by LNG and deepwater development coupled with Permian growth. CVX also outlined its consistent strategy and plan to balance its cash equation with expected cash flow covering its dividend in 2017 due to cash flow growth, reduced spending, cost savings initiatives, and asset sales (estimating $9B in 2015-2017).  

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.