Easing political tensions between the semi-autonomous Kurdistan Region and the federal government of Iraq have led Chevron Corporation CVX to announce plans to resume drilling activities in the Kurdistan Region in Iraq. The company had called off operations in the region in October 2017 owing to increasing dispute.
Post the Kurdistan independence referendum (September 2017), which was strongly opposed by the Iraqi government, the latter seized the oil fields in Kirkuk and Kirdustani regions. The move reduced the revenues of the region to half owing to the loss of over 350,000 barrels of oil production per day, raising supply concerns in the region.
However, with the dispute abating of late, Chevron has started to take necessary steps to remobilize staff and equipment in the region to recommence operations at the Sarta 3 block in Kurdistan. Chevron is the chief operator of the block holding 80% interest in the Sarta product-sharing contract (PSC). It also operates at the Qara Dagh field with an 80% PSC.The two blocks cover a combined area of 279,000 net acres.
The company started its operations in the Kurdistan region in 2012. However, Chevron was blacklisted by Iraqi government in July 2012 after the company signed contracts with the Kurdistan Regional Government to acquire two exploration blocks in the region. This made Chevron the second oil major to be blacklisted after ExxonMobil Corporation XOM. The move was meant to keep away oil companies from dealing with the semi-autonomous Kurdistan region directly.
Zacks Rank and Key Picks
San Ramon, CA-based Chevron is one of the largest publicly traded oil and gas entities in the world per 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.
Owing to Chevron's focus on well planning and execution, the company continues to reduce its operating costs with underlying expenses, down almost 5% year to date compared with the figures recorded in 2016. Cash capital expenditures for the first nine months of the 2017 also declined 30%. However, Chevron's exposure to production in the vulnerable and violence-prone regions in Nigeria poses risk.
Chevron’s stock has gained 14.6% over a year compared with 13.2% growth of its industry. Chevron currently carries a Zacks Rank #3 (Hold).
Few better-ranked players in the same industry are Statoil ASA STO and ENI S.p.A E. While Statoil sports a Zacks Rank #1 (Strong Buy), Eni carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Statoil has an expected earnings growth rate (next 3-5 years) of 24.18%.
Eni delivered an average positive earnings surprise of 147.35% in the trailing four quarters.
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