Global integrated energy company, Chevron Corporation (CVX) announced the discovery of a major oil field in the ultra-deepwater of the U.S. Gulf of Mexico (GoM). The company resumed drilling the well in March after a hiatus of almost a year due to the drilling moratorium.
Located in the Moccasin prospect –– off the Louisiana coast –– the well was drilled to a depth of 31,545 feet. The Keathley Canyon Block 736 Well No. 1 is estimated to hold more than 380 feet of net pay in the Lower Tertiary Wilcox Sands. However, Chevron did not disclose the full potential of the discovery as the well is still under evaluation.
Chevron acts as the operator of the project with a working interest of 43.75%, while the remaining stake is shared by BP plc (BP) (43.75%) and Samson Offshore Company (12.5%).
The Moccasin find highlights the significance of deepwater Gulf of Mexico as a source of domestic energy for the United States as well as a centre of primary drilling ground for exploration companies.
This discovery adds to the basket of Chevron’s ventures in the Gulf of Mexico. In October 2010, the company announced plans to invest approximately $7.5 billion in developing two large fields –– Jack and St. Malo. In December 2010, Chevron decided to go ahead with the development of the Big Foot field.
San Ramon, California-based Chevron is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
On the back of a rich variety of oil and gas development projects across the globe, Chevron is targeting to achieve a volume growth of 20% by 2017. With an impressive business model, emphasis on upstream portfolio and a healthy balance sheet, the company will be able to deliver superior performances in the coming months.
However, Chevron remains particularly susceptible to volatile oil and gas fundamentals, operational disturbances and international business risks. As such, we see the stock performing in line with the broader market and maintain our long-term Neutral recommendation. Chevron currently retains a Zacks #3 Rank (short-term Hold rating).
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