Chevron Canada Limited, a subsidiary of the U.S. energy behemoth, Chevron Corporation (CVX), has completed the initial phase of exploration in the Kaybob area of the liquid-enriched Duvernay play, in Alberta, Canada.
The initial exploration drilling program comprises 12 wells of which five have already been completed and have entered production. Four of the remaining wells are near completion, waiting to come online. Liquid component for the completed wells makes up around 30–70% of the total. Initial production rates are 7.5 million cubic feet per day of natural gas and 1,300 barrels per day of condensate.
This exploration activity adds value to the company’s portfolio. Positive results of the drilling activities, exceeding company expectations, reflect growth potential for Chevron in Canada. Per management, short-term plans include a shift to a two-rig drilling program to enhance the capacity of the wells and full-field spacing requirements.
The total holding of Chevron in the Duvernay play stands at about 325,000 net acres post acquisition from Alta Energy Luxembourg S.à.r.l. and affiliates, earlier this year.
San Ramon, Calif.-based Chevron is one of the largest publicly traded oil and gas companies in the world. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron is expected to report its third quarter earnings on Nov 1, and we are bearish on the results. Last quarter, the company failed to beat the Zacks Consensus Estimate and we expect this negative trend to continue into this quarter. The pre-earnings update, which the company released earlier this month, also supports our view. Per the interim update, Chevron expects third quarter earnings to deteriorate from the previous quarter.
Chevron currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
However, one can consider other stocks in the energy sector such as Vermilion Energy Inc. (VET), Baytex Energy Corp. (BTE) and Linn Energy, LLC (LINE) as good investment options. These stocks currently hold a Zacks Rank #1 (Strong Buy) and are expected to significantly outperform the market in the near term.
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