Chevron Corporation CVX, the second-largest U.S. oil producer, is contemplating the sale of its geothermal assets in Asia to counter sluggish economic growth and weak commodity prices.
With WTI crude oil price trading around $30 per barrel, down from the $90–$100 per barrel mark less than 2 years ago, and natural gas trading below $2/MMBtu, earnings and cash flows of the company have been severely affected. Chevron’s upstream unit, which is its largest earnings generating segment, was the worst hit due to the ongoing oil price slump, as its results are directly influenced by commodity price movements.
The company’s main Asian geothermal holdings are concentrated in Indonesia and the Philippines. The sale of these assets is expected to generate as much as $3 billion for the company. Chevron is in talks with financial advisers regarding the sales of these assets even though no formal process has been decided upon.
Chevron has already canceled drilling projects and slashed headcount to counter low energy prices. Apart from the geothermal assets, the company is also trying to sell its stake in the Indonesian oil and natural gas field to improve cash flow.
San Ramon, CA-based Chevron Corporation is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
Chevron currently carries a Zacks Rank #5 (Strong Sell), which implies that the stock will underperform the broader U.S. equity market over the next one to three months.
Some better-ranked players in the energy sector are Enviva Partners, LP EVA, Braskem S.A. BAK and Petróleo Brasileiro S.A. – Petrobras PBR.A. All these stocks sport a Zacks Rank #1 (Strong Buy).
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