Chevron is taking steps to more than double its production in Venezuela, planning to invest more than $7 billion in the country over the next five years.
Chevron will expand Venezuela operations, more than doubling production through $7 billion investment
Chevron said on Wednesday it had agreed with Venezuela on updated terms for its joint ventures in the country and plans to invest more than $7 billion over the next five years, targeting production of about 600,000 bpd.
Energy stocks led the market higher Monday morning as two major oil catalysts hit at once.
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CVX and HAL are nearing Venezuela oil deals that could unlock billions in investment as the United States pushes to rebuild production.
Shares of Chevron (NYSE:CVX | CVX Price Prediction) and Exxon Mobil (NYSE:XOM) are climbing in Monday morning trading after the United States and Iran resumed military strikes over the weekend, with shipping through the Strait of Hormuz still constrained.
Chevron and Occidental Petroleum are both large energy companies. Occidental Petroleum has a trailing 12-month payout ratio of 30%, compared to Chevron's 66%.
Chevron remains the only U.S. supermajor operating in Venezuela. U.S. oil reserves could be more strategically developed domestically. The infrastructure is superior and the government is stable compared to Venezuela. Large companies like CVX are unlikely to alter long-term plans in response to short-term oil price spikes.
The S&P 500 has already cleared Bank of America's year-end target of 7,100, a sign that broad index exposure carries more risk than the rally suggests; historically, a correction near 10% arrives about once a year. Savita Subramanian, the firm's head of US equity and quantitative strategy, sees dividends playing a bigger role in returns as payout ratios sit near record lows, a shift toward what she calls a “total return” market.
Chevron and PepsiCo both raised their dividends this year, but the forces threatening each payout could not be more different. One faces a commodity cycle, the other a slower and harder problem to fix.
The U.S. oil major is close to a deal to add two heavy-oil fields to its portfolio in Venezuela. Oil services provider Halliburton is also in talks.