While multiple oil and gas peers have announced many strategic shifts in recent years, Chevron Corporation (NYSE:CVX)’s analyst day commentary was consistent with prior messaging, according to analysts at RBC Capital Markets.
“While low-carbon ventures (hydrogen, CCS, biofuels) spanned the presentation, spending levels remain modest in the context of the overall business,” the analysts wrote in a note to clients.
“Given the focus on improving its return on capital employed (ROCE), we expect this to remain the case, while carbon intensity metrics should naturally improve as the Permian becomes a larger portion of the portfolio.”
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The analysts noted that the oil and gas producer's focus on growing the enterprise on a stringent capital budget should be well received by investors, however, time will tell as to whether the company has convinced the market on moving past challenges at its Permian project.
“The Permian remains Chevron’s core asset, representing a large and growing part of the upstream, and over a third of the company’s overall 6P resource base,” they wrote.
“Poor performance in the Delaware basin last year was driven by long-sitting DUCs (drilled but uncompleted wells) and dated well designs according to management, and this will be a key item to watch going forwards.”
As such, the analysts maintained their ‘Sector Perform’ rating on the stock with a price target of US$170. Chevron shares are currently trading at about $161.70.
Contact the author at emily.jarvie@proactiveinvestors.com
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