CVX - Embedded Expectations Analysis - 2021 02 08
Chevron Corporation (CVX:USA) currently trades at a discount relative to UAFRS-based (Uniform) assets, with a 0.8x Uniform P/B. At these levels, the market is pricing in expectations for profitability to remain muted, and management may be concerned about margins, commodity prices, and their oil and gas investmentsSpecifically, management may lack confidence in their ability to further progress their clean energy transition and strengthen their value chains in Asia. Moreover, they may be concerned about their downstream business margins, the sustainability of margin improvements in the West Coast, and the sustainability of the commodity price recovery. In addition, they may be exaggerating the potential of their North West Shelf infrastructure investment, the prospects of their GS Caltex hydrogen testing site in South Korea, and the progress of their retail station terminal expansion in Australia. Furthermore, management may lack confidence in their ability to manage manufacturing costs and the position of their refinery network to benefit from a market recovery. Finally, they may be concerned about their partnership with Algonquin and the progress of their workforce mobilization efforts
Chevron is engaged in energy and chemicals operations. Upstream operations consist primarily of, among others, exploring for, developing and producing crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas, storage and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of, among others, refining crude oil into petroleum products; marketing of crude oil and refined products; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives.
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