U.S. energy giant Chevron Corp. (CVX) declared the commencement of first oil and natural gas production from the Tubular Bells deepwater development situated in the U.S. Gulf of Mexico (GoM). Chevron has a 42.86% ownership in the project whereas upstream energy firm Hess Corporation (HES) is the operator of the development with 57.14 % interest.
Tubular Bells is an oil and gas field, located at water depth of roughly 4,300 feet in the Mississippi Canyon region. The field – with estimated production life of 25 years − was discovered in 2003 and the development of the project started in Oct 2011. Tubular Bells field consisting of three wells is expected to produce roughly 50,000 barrels of oil-equivalent per day.
Chevron added that with the production of first oil from the project, the company has moved a few steps ahead in achieving its target of 3.1 million barrels per day output by 2017.
Management revealed that the Tubular Bells and Jack/St. Malo projects have significantly strengthened the deepwater portfolio of the company. The Jack/St. Malo development, which is operated by Chevron, would come online later this year.
San Ramon, CA-based Chevron is one of the largest publicly traded oil and gas companies in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
However, Chevron has a high 2014 capital budget of $39.8 billion. This is expected to substantially increase Chevron’s leverage and deteriorate its credit metrics. Additionally, the increasing capital intensity of its operations may result in reduced returns going forward.
As a result, Chevron currently carries a Zacks Rank #3 (Hold), implying that will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Sandridge Mississippian Trust II (SDR) and SandRidge Mississippian Trust I (SDT). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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