CHEVRON CORP. $93 - New York symbol CVX

CHEVRON CORP. $93 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $176.7 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.6%; TSINetwork Rating: Average; www.chevron.com) produced an average of 2.54 million barrels of oil a day (including natural gas) in the three months ended September 30, 2015. That’s down 1.1% from 2.57 million barrels a day a year earlier. The decrease is mainly because Chevron has sold $11 billion worth of less important businesses since 2014; the company aims to sell another $5 billion to $10 billion worth of assets by the end of 2017. In addition to the lower production, Chevron’s realized oil price plunged 51.7% in the latest quarter, while gas prices fell 43.4%. As a result, the company’s overall revenue declined 37.2%, to $34.3 billion from $54.7 billion. Earnings dropped 63.6%, to $2.0 billion, or $1.09 a share, from $5.6 billion, or $2.95. However, Chevron’s refineries continue to benefit as the drop in crude oil prices reduces their input costs: the company’s refinery business reported 59.4% higher earnings in the latest quarter. In response to weak oil prices, Chevron plans to lay off 10% of its workforce. It will also lower its 2016 capital spending by 24% from what it will probably spend for all of 2015, to $26.6 billion. Meantime, the company should benefit from the start-up of two big offshore gas projects in the next 18 months: the 47.3%-owned Gorgon field, off Australia’s northwest coast, and the 64.14%-owned Wheatstone field, located nearby. Each will also have a plant to convert the gas into a liquid for shipment to buyers in Asia. The company’s strong balance sheet will also help it cope with low oil prices: as of September 30, 2015, it held cash of $13.2 billion, or $7.03 a share. Its longterm debt of $29.3 billion is a moderate 17% of its market cap. The stock trades at a high 22.4 times Chevron’s depressed 2016 earnings forecast of $4.16 a share. The $4.28 dividend seems safe and yields 4.6%. Chevron is a buy.

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