Neutral But Noteworthy: Analyst Discusses Chevron's Improving Well Productivity And Future Prospects

Mizuho Securities USA analyst Nitin Kumar reiterated a Neutral rating on the shares of Chevron Corporation CVX and raised the price target from $202 to $205.

For 2Q23 earnings, in the analyst's opinion, well performance in the Permian will continue to be the main focus for investors, following the underperformance of Delaware wells in 2022.

Recent data from the analyst's proprietary ARCHIE database suggests early signs of well productivity improvements, validating management's outlook.

According to the analyst, given the additional OPEC+ cuts by Saudi Arabia and Russia, the macro outlook and views on global oil supply-demand will be looked forward to.

M&A discussion, given PDCE acquisition that is likely to close by mid-August, will also be an important aspect in 2Q earnings, the analyst added.

The potential exploration campaign in the Gulf of Mexico has also drawn interest, given the fact that Chevron was the highest bidder in the most recent auction in March, opined the analyst.

The analyst expects total production of 2,954kboed, slightly above the guided -80kboed, but in line with consensus, primarily due to planned maintenance in Australia, turnaround in the Gulf of Mexico, and a small impact from a FPSO in Thailand.

The analyst sees sequential commodity price weakness to lead to an EBITDA/free cash flow miss versus consensus in the quarter and forecasts a miss vs. consensus for EBITDA / FCF / EPS, lower by 12%, 15%, and 6%.

Price Action: CVX shares are trading higher by 1.7% at $157.90 on the last check Tuesday.