Chevron Overseas Congo Limited - an affiliate of
) - announced its plans to develop the Lianzi field. Located 65
miles away from the shore and at a water depth of about 3,000 feet,
the field lies in a zone between the Republic of Congo and the
Republic of Angola.
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The development project - worth $2.0 billion - involves the
installation of subsea production system and a 27-mile electrically
heated flowline. These will be used to transport oil from the field
to the Benguela Belize Lobito Tomboco platform, located in Angola
The project - which is expected to produce its first oil in 2015 -
will have a production capacity of maximum 46,000 barrels of oil
equivalent per day, upon completion.
Chevron's arm in Congo will act as the operator of the Lianzi field
with a 31.25% interest, while
) controls a 36.75% stake. The remaining stakes are shared among
) (10%), Angolan energy firm Sonangol (10%), the Republic of Congo
National Oil Company - SNPC (7.5%) and Portugal-based Galp Energia
This is Chevron's first venture in the Republic of Congo and the
company looks to establish a strong foothold in West Africa - one
of the richest hydrocarbon basins in the world.
Both Congo and Angola will likely provide support to the
cross-border project. The Lianzi field will also act as the source
of encouragement for the development of other cross-country fields.
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 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 downside risk from any weakness in the global
economy. We are also concerned regarding 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).