U.S. energy behemoth
) believes that there is a significant accumulation of
extractable shale gas in Eastern Europe.
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Lithuania, one of the Eastern Europe nations, has local reserves
of nearly 60 billion cubic meters of natural gas, as per the
country's geological authority. This is sufficient for the coming
20 years at the present utilization rate. Extraction of shale gas
- found beneath layers of porous rock formations called shale -
is quite difficult. As a result, Chevron purchased 50% interest
in Lithuanian oil and gas exploration company, LL Investicijos
last year to tap the same.
Currently, Lithuania is fully dependent on Russia's oil giant
Gazprom for natural gas supply, and in order to gain energy
independence, the country is trying to extend its resources. We
see Chevron's stake purchase in Lithuania as a clear sign of its
growing interest in European unconventional natural gas. Chevron
has already purchased about 4 million of exploration acreage in
Poland and Romania.
Chevron is also looking to win exploration license in the country
that will help it to increase its worldwide sales capacity for
It is expected that Chevron will increase its stake in Lithuania
in the coming years.
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 integrated peers, which include oil
Royal Dutch Shell plc
). The company's balance sheet strength helps it to capitalize on
investment opportunities with the option to make strategic
Management made significant progress in re-balancing Chevron's
asset portfolio by divesting non-core and high-cost assets. The
company's decision to sell its marketing businesses in Kenya,
Nigeria, Uganda, Western Africa and Brazil is part of that
strategy. In particular, Chevron plans to exit the low profit
generating business and concentrate on the discovery of oil and
However, Chevron's production growth profile depends on the
timely development of upstream projects, almost all of which have
inherent risk factors. Time and cost overruns on these programs
may lead to lower returns going forward.
Chevron currently carries Zacks Rank #3 (Hold).