U.S. energy giant Chevron Corp.’s (CVX) affiliate in Brazil along with Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR) has initiated production of crude oil from the Papa-Terra oil and gas field. The field, discovered in 2003, is located off the coast of Brazil at roughly 3,900 feet below the water level.
In the field, Chevron has 37.5% ownership. Whereas, Petrobras as an operator of the project retains the rest. It is expected that the Papa-Terra oil and gas field will eventually produce 140,000 barrels per day of crude oil. Moreover, Chevron believes that the project will significantly help it to achieve its 2017 growth target.
San Ramon, California-based Chevron is one of the largest publicly traded oil and gas company in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
Chevron’s production growth profile depends on the timely development of upstream projects, almost all of which have inherent risk factors. Time and cost overruns on these programs may lead to lower returns going forward.
Moreover in the recently reported third quarter, Chevron’s downstream segment reported earnings of $380.0 million, 44.8% lower than the profit of $689.0 million last year, owing to lower refined product sales margins and higher repair/maintenance expenses in its domestic business. This is a cause of concern.
Chevron currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better performing energy firms like Matador Resources Co. (MTDR) and SM Energy Co. (SM) that offer value. Both the firms sport a Zacks Rank #1 (Strong Buy).