CVX - Embedded Expectations Analysis - 2021 10 07
Chevron Corporation (CVX:USA) currently trades at a discount to UAFRS-based (Uniform) assets, with a 0.9x Uniform P/B. At these levels, the market is pricing in expectations for profitability to recover, but management may be concerned about their capital allocation strategy, net debt ratio, and the focus of the New Energies business.Specifically, management may lack confidence in their ability to reduce their net debt ratio, efficiently invest capital, and increase both share buybacks and their dividend. In addition, they may have concerns about long-term capex guidance and the downside of commodity price volatility. Furthermore, management may be overstating the potential of CO2 concentration and carbon capture technology and the progress of their TCO development and Gulf Coast projects. Finally, they may be concerned about the focus of their New Energies business, the sustainability of oil equivalent production growth, and the cost of pension contributions.
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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