Chevron Overseas Congo Ltd, a subsidiary of energy giant
), has recently contracted Norwegian oilfield services firm Subsea
7 for $600 million. Per the agreement, Subsea 7 will install and
supply subsea components for the development of Lianzi field,
offshore Congo and Angola.
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The technical aspect of the contract includes a 12-inch wet,
insulated production flow-line with direct electrical heating. This
will set a record for the deepest electrically-heated pipe.
Part of the designing and fabrication will be done in Angola's
capital city, Luanda. The additional work will be carried out in
Lobito by Subsea 7's Angolan joint venture. At Subsea 7's Luanda
base, all flow-lines will be spooled to the Seven Oceans rigid
Management at Subsea 7 is of the opinion that this contract will
fit its capacity for large scale projects and the company is
looking forward to deliver this project safely.
San Ramon, California-based Chevron displays a strong portfolio of
global projects, targeting volume growth of around 20% by 2017.
Additionally, Chevron possesses one of the healthiest balance
sheets among its peers - which include
Royal Dutch Shell plc
) - that helps it to capitalize on investment opportunities with
the option to make strategic acquisitions.
However, due to its integrated nature, Chevron is particularly
susceptible to the downside risk from any weakness in the global
economy. We are also concerned by the company's high level of
capital spending, which may result in reduced returns going
As such, we see the stock performing in line with the broader
market and maintain our long-term Neutral recommendation, supported
by a Zacks #3 Rank (short-term Hold rating).