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Chevron (CVX) Inks Final Phase of $1.7B JV Deal With NNPC

Zacks Equity Research
Updated

Chevron Corporation CVX recently sealed the second and final phase of the $1.7-billion joint venture (JV) deal with state-owned Nigerian National Petroleum Corporation (‘’NNPC’’).

The JV project, which is almost 92% complete, is financed in two stages with $780 million funded by third parties. In the first stage of the deal (which closed on Aug 1, 2017), $400 million was funded by the Nigerian Commercial Banks, while $380 million will be provided by International Commercial Banks for the second stage of the deal. Chevron is set to contribute $312 million for the project whereas NNPC will spend $468 million.

The project involves the production of natural gas liquids and condensate from Sonam and Okan fields in the Niger Delta. Per the deal, the companies will complete the construction of Sonam pipeline and living quarters platform along with non-associated gas (NAG) well platform. The agreement also involves the development of Okan pig receiver platform and other associated facilities. The companies will also be required to complete the drilling of seven wells in the Sonam Field along with the Okan 30E NAG well. Currently, while the facilities are fully completed, the wells are 40% executed.

Nigeria — being one of the biggest oil producing countries in Africa — represents a very significant portion of the total upstream production volumes of Chevron. It accounts for a major portion of the company’s international asset base with Chevron holding 40% interest in the Escravos Gas Plant and Sonam field. Notably, Agbami oilfield contributes maximum to Chevron’s Nigerian upstream volumes. The U.S. supermajor also holds stakes in Escravos Gas-to-Liquids plant, West African Gas Pipeline Usan and Owowo oil prospects among many others. Chevron’s development projects in Nigeria are aimed at boosting output growth and exports.

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Plummeting oil prices along with rising militantism has lowered the production and revenues of the country and posed risk to Chevron’s operations in the region. However, the ongoing government peace talks have eased the situation to a considerable extent.  Last year, Chevron’s Nigerian operations accounted for 235,000 barrels of oil equivalent per day.

The deal is also in line with Nigeria’s energy sector reform initiatives and aims at enhancing the country’s oil and gas production by 39,000 barrels per day and 283 million standard cubic feet per day, respectively. Nigeria currently produces 1.7 million barrels of oil per day (Bpd) which is expected to rise to 2.2 million Bpd by 2018 and 4 million Bpd by 2020. In a bid to bolster its reserves, production and daily revenues, Nigeria is currently focusing on inking deals with foreign companies including Royal Dutch Shell plc RDS.A, Chevron and Schlumberger Limited SLB to develop oil fields. 

Zacks Rank and Key Pick

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. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chevron Corporation Price

 

Chevron Corporation Price | Chevron Corporation Quote

 

One of the better-ranked stocks in the same industry is BP plc BP which sports a Zacks Rank #1 (Strong Buy).  The British energy giant delivered an average positive earnings surprise of 26.8% in the trailing four quarters.

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Schlumberger N.V. (SLB) : Free Stock Analysis Report
 
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