Chevron, Tohoku in 20-Year Deal - Analyst Blog

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Last Tuesday, integrated energy behemoth, Chevron Corp.'s ( CVX ) Australian units entered into a sales and purchase contract with Tohoku Electric Power Company Inc, an electric utility firm in Japan.  

Per the deal, Chevron's subsidiaries will provide roughly 0.9 million tonnes of liquefied natural gas (LNG) annually from Chevron's Wheatstone LNG project for a period of 20 years. The Western Australia-based Wheatstone development is worth $29 billion and is believed to start operation by 2016. The initial phase of the project includes the construction of two processing units, known as trains, will have total capacity of 8.9 million tons of LNG a year along with a domestic gas plant.

Chevron acts as the operator of the project with about 64.1% ownerships. U.S. energy firm Apache Corp. ( APA ) and integrated energy giant, Royal Dutch Shell plc ( RDS.A ) hold 13.0% and 6.4% interests, respectively.

Chevron reveals that roughly 80% of the feed gas that will be supplied to the Wheatstone project is expected to come from Wheatstone and Iago, an offshore gas field. Chevron has roughly 80.17% ownership in the field.

Chevron has contracted 85% of its share of Wheatstone LNG project output to Asian customers. Management believes that once the Wheatstone development comes online, Chevron will be able to serve natural gas' growing demand in the Asia-Pacific region.

However, the news - which was announced an hour before the markets closed on Tuesday - had little impact on the company's stock price. By close of trade on Wednesday, Chevron settled at $120.83 per share, marginally 0.4% lower from last day.

San Ramon, Calif.-based Chevron currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.    

Meanwhile, one can look at better performing energy firms like Stone Energy Corp. ( SGY ) that offers value. The stock sports a Zacks Rank #1 (Strong Buy).



APACHE CORP (APA): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: APA , CVX , LNG , RDS.A , SGY

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