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Chevron Plans to Sell Eagle Ford Basin Oil and Gas Assets – Report
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Chevron Plans to Sell Eagle Ford Basin Oil and Gas Assets – Report

Chevron (CVX) plans to divest its oil and gas assets in the Eagle Ford Basin, reports Reuters citing people familiar with the matter. A spokesperson has also confirmed that the energy company has started marketing the assets in South Texas for sale as part of a routine portfolio review. CVX shares fell 0.23% to close at $97.49 on September 3.

Chevron is an energy company engaged in the exploration, development, and production of crude oil and natural gas.

Marketing documents reveal that the assets up for sale could be worth about $1 billion, as they have proven developed resources with a 90% or greater probability of profitability. With oil prices trading at $70 a barrel and gas at $4, the prospects of Chevron generating a significant amount from the sale increase.

The assets could be worth $3.8 billion at current prices after factoring in undeveloped inventory. People familiar with the matter insist that prospective buyers could bid between $1 billion and $2 billion for the assets. (See Chevron stock charts on TipRanks)

The proposed sale comes as oil companies are increasingly divesting properties, taking advantage of a spike in oil and gas price to multi-year highs. A 40% spike in crude prices has presented an opportunity for the company to bolster its balance sheet through sales to return value to shareholders and pursue future investments.

Reuters reports that Chevron plans to resume its Buybacks in the current quarter, having already stepped up its sales program. It has already marketed two collections of oil and gas fields in the Permian Basin.

Chevron has also held talks with activist hedge fund Engine No. 1 as it looks to cut its carbon emissions.

Last month, RBC Capital analyst Biraj Borkhataria reiterated a Hold rating on the stock and lowered the price target to $130 from $135, implying 33.35% upside potential to current levels. According to the analyst, Chevron’s prized asset, the Permian, has carbon intensity below the group average.

Borkhataria stated, “Over the coming years, we expect investors to focus on rate-able reductions in emissions intensity for oil and gas producers, and we believe CVX could screen well on this basis.”

Consensus among analysts is a Moderate Buy based on 10 Buys and 4 Holds. The average Chevron price target of $127.92 implies 31.21% upside potential to current levels.

CVX scores a 7 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.

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