U.S. oil major
) has entered into a deal with South Australian oil and gas
producer Beach Energy Ltd. to acquire shale gas assets. This deal
marks the first shale investment in Australia by Chevron.
Per the deal, Chevron will initially have a 30% working interest
in block PEL 218 in South Australia and an 18% working interest
in block ATP 855 in Queensland. Both the blocks cover about
810,000 acres in the Cooper Basin.
Chevron will pay $36 million in cash and cover $95 million in
costs for the South Australia consent and $59 million in cash for
the Queensland acreage. Beach Energy will get up to $349 million
in 2 stages, spanning several years, for the stake sale in the 2
gas blocks. The deal - which is subject to approval from the
local government and the Foreign Investment Review Board - also
provides Chevron with an option to increase its interest to 60%
in PEL 218 and 36% in ATP 855.
The Cooper Basin is considered one of the best for commercial
production of shale gas in Australia. Santos Ltd. was the first
to produce the same in Cooper Basin in August last year, from its
Chevron is already building liquefied natural gas (LNG) plants in
Western Australia (Gorgon and Wheatstone) with a joint capacity
of about 25 million tons per annum.
We believe that this acquisition will boost Chevron's growth
prospects in Australia by adding to its already significant gas
interests in the country.
The company currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the broader U.S.
equity market over the next 1 to 3 months.
Chevron's current oil and gas development project pipeline is
among the best in the industry, targeting volume growth of 20% by
2017 - more than twice the rate of growth from 2003 to 2010.
However, the company conducts operations in many countries. As
such, the company is exposed to risks associated with doing
business abroad. Such risks include embargoes or expropriation of
assets, exchange rate risks, terrorism and political/civil
But there are certain other companies in the oil industry that
are expected to perform well in the coming 1 to 3 months. These
Royal Dutch Shell plc
) with a Zacks Rank #1 (Strong Buy), as well as
) with Zacks Rank #2 (Buy).
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