More Upside In Chevron? (CVX)

Oil giant Chevron CVX reported strong earnings today, but missed on the top line, as all of the oil majors have done this year, but shares are higher today. Could there be more upside in shares? Chevron, which is the second-largest U.S. oil company behind Exxon, reported earnings of $3.09 per share on revenues of $58 billion. Wall Street had been expecting earnings of $3.00 per share on revenues of $66.34 billion, thanks in large part to rising crude oil prices, due to political instability around the globe, higher demand, and easy monetary policy. “Our first quarter financial performance was strong,” said Chairman and CEO John Watson. “Current quarter earnings from upstream operations benefited from higher prices for crude oil, while downstream operations benefited from improved margins on refined petroleum products. We continue to operate safely, advance our major capital projects and restructure our downstream portfolio.” Watson continued, “We are aggressively investing in affordable supplies of new energy to meet the needs of a growing economy. Our combined capital outlays and investments during the quarter amounted to over $8 billion.” The company completed the acquisition of Atlas Energy, Inc., which provides a premier position in the Marcellus Shale in southwestern Pennsylvania, and strengthens the company's global position in developing unconventional gas resources. The company continues to advance its major capital projects, including deepwater projects in the Gulf of Mexico and multiple LNG projects in Angola and Australia. The Gorgon Project in Australia continues on pace, and the company finalized agreements to bring another major participant into the Australian Wheatstone Project as both a natural gas supplier and equity participant. Watson continued, “We recently received our first deepwater exploratory drilling permit in the Gulf of Mexico following the moratorium, and have resumed work on our Moccasin well that was suspended in June of last year. The resumption of deepwater drilling activity in the Gulf of Mexico is vital to improving our nation's energy security and supporting the economic recovery. We are working with the government to improve the efficiency and transparency of the permitting process.” “In the downstream business, we made further progress on streamlining our asset portfolio,” Watson added. The company announced an agreement to sell its 220,000-barrels-per-day Pembroke Refinery and other downstream assets in the United Kingdom and Ireland for $730 million, plus additional proceeds estimated at $1 billion for the company's inventory and other working capital. The transaction is expected to close in the second-half 2011. The company also announced an agreement to sell its fuels, finished lubricants and aviation fuels businesses in Spain, and completed the sale of its fuels-marketing and aviation businesses in nine eastern Caribbean countries as well as its fuels-marketing businesses in two African countries. So is there more upside in shares of Chevron? All signs point to yes. Shares are currently pricing in about $90 oil according to some energy analysts, at West Texas Intermediate crude oil is currently trading around $113 per barrel. It trades at 8.3 times 2012 earnings, sports a 2.6% dividend yield, and should continue to see strong demand for oil, as well as its ever growing natural gas portfolio. As the company continues to streamline its overall portfolio, it's very possible that Chevron could see shares rise with higher oil prices.