Oil companies have had a turbulent year so far in 2020. Between negative oil prices and the ongoing coronavirus situation, large oil companies have had a lot to deal with. Many of the smaller oil producers out there have ended up going bankrupt, often resulting it bargain bin buyout deals from larger companies in the market. To many people’s surprise, however, one of the larger oil companies in the world is making an unconventional play. Chevron (NYSE: CVX) announced on Tuesday that it would be making a major investment in a top oil field in Iraq.
While there has been a lot of historical instability in the region, the move from Chevron is a big vote of confidence from the company that Iraq’s energy industry could be making a come back. Over the past few years, the region in question has seen foreign investment start and stop frequently. More specifically, the oil field happens to be one of the largest in the country, currently located in the southern portion of the nation.
If the deal ends up going through, it would be formally announced during a trip later this week between Iraq’s new prime minister and President Trump. Besides this, the official trip is also expected to announce further progress made in a potential natural-gas deal with other companies, including General Electric, Honeywell, and Stellar Energy.
While the Chevron deal is relatively small, valued at around several hundred million dollars if it goes through, it’s a pretty big deal when you consider that most energy companies have dialed back on spending this year. The decline in oil prices has made many businesses jittery about what the future holds, while the lack of demand from travel and international shipping has led to a corresponding lack of demand in oil.
Even back in July, Chevron announced it would be spending up to $5 billion to acquire Noble Energy, making it the largest oil and gas-related acquisition since the coronavirus pandemic took place. This aggressive strategy might end up paying dividends for Chevron down the road, but it’s certainly risky in the short-term.
Shares of Chevron are down around 2% in Tuesday’s trading session, although premarket trading is showing a bit of an upswing. Over the past few months, however, Chevron’s stock has been on a steady downturn. Oil is doing decent for itself, with prices for Brent Crude trading at around $44.9 per barrel, while West Texas Intermediate is trading closer to $41.9 per barrel.
Chevron Company Profile
Chevron is an integrated energy company with exploration, production, and refining operations worldwide. Chevron is the second-largest oil company in the United States with production of 3.2 million of barrels of oil equivalent a day, including 7.6 million cubic feet a day of natural gas and 2.0 million of barrels of liquids a day. Production activities take place in North America, South America, Europe, Africa, Asia, and Australia. Its refineries are in the United States, South Africa, and Asia for total refining capacity of 1.7 million barrels of oil a day. Proven reserves at year-end 2019 stood at 11.4 billion barrels of oil equivalent, including 6.5 billion barrels of liquids and 29.5 trillion cubic feet of natural gas. – Warrior Trading News
