Chevron Corporation (CVX) has entered into a deal with privately held exploration and production company Hilcorp Energy to sell all of its interests in Alaska's Cook Inlet basin. Chevron will execute the deal through its wholly owned Alaskan subsidiary, Union Oil Co. of California. The financial terms of the deal were not disclosed.
The properties included in the disposition pact comprise Chevron’s interests in the Granite Point, Middle Shoals, Trading Bay and MacArthur fields along with interests in 10 offshore platforms and onshore gas fields. The sale of two gas-storage facilities and the company's interests in the Cook Inlet Pipe Line Co and Kenai Kachemak Pipeline LLC are also part of the deal.
Spread over 176,000 acres of land in Alaska, the to-be sold assets generate a net daily production of 3,900 barrels of oil and 85 million cubic feet of natural gas. The deal, pending customary regulatory approvals, is slated for closure this year end.
Chevron intends to keep its 1.36% stake in the Trans Alaska Pipeline System along with interests in several Alaska North Slope fields. As a part of the company’s asset base restructuring strategy, management announced plans to dispose Cook Inlet assets last October.
We believe that California-based Chevron exhibits strong growth momentum in the coming years as reflected by the targeted volume growth of 20% by 2017. With the economic rebound and rallying oil prices, we expect the company to continue to accelerate revenue and earnings growth over the next few quarters.
We also appreciate Chevron’s initiatives to trim its less lucrative operations and concentrate on high profit generating exploration and production business. In this regard, the company is already in the process to sell various properties in more than 20 counties, including Spain, Caribbean and southern Africa.
Given the optimistic outlook, we expect Chevron to perform better than its peers such as BP plc (BP) and Exxon Mobil Corporation (XOM) and maintain our long-term Outperform rating on the stock.
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