Chevron Clinches Australia Gas Deal With BHP Nickel West


U.S. energy giant Chevron Corp. (CVX) said it clinched a deal in Australia with BHP’s (BHP) Nickel West unit for the delivery of natural gas.

Starting in July, Chevron will supply BHP Nickel West with a total of 22 petajoules of equity domestic gas from its Wheatstone facility over a 3.5 year term. Financial terms of the agreement weren’t disclosed.

Chevron Australia Managing Director Al Williams said the agreement highlighted the important role of natural gas in powering critical industries, such as mining, across the state.

“Chevron is committed to delivering natural gas supplies to Western Australian homes and businesses, helping to power local jobs, industry and communities,” Williams said. “As a reliable and cost-effective way to generate electricity, natural gas is a vital energy source for current and future energy needs of Western Australian industry.”

At full capacity, the Chevron-operated Gorgon and Wheatstone natural gas facilities will produce 500 terajoules per day of domestic gas for the Western Australian market – enough to generate electricity for 4.3 million households.

Chevron has been present in Australia for more than 60 years and operates the country’s largest onshore oilfield on Barrow Island and is a significant investor in exploration.

Chevron stock, which fell sharply with the onset of the coronavirus pandemic, has gained back part of its losses over the past three months. However, shares are still down 27% for the year. They fell 4% to $87.77 in midday trading on Wednesday.

Morgan Stanley analyst Devin McDermott this month reiterated a Buy rating on the stock with a $103 price target, citing the macro backdrop improvement, sustained higher prices needed to increase capex, and the focus on lower emissions and breakthrough technologies.

“CVX remains our preferred US integrated oil stock, offering peer-leading cash flow anchored by low-risk investments, a differentiated value proposition in the sector – particularly in the current uncertain macro backdrop,” McDermott wrote in a note to investors. “The strategy supports its ~6% dividend yield, all with a low corporate breakeven and strong balance sheet that make the strategy resilient through the cycle, while retaining attractive leverage to any potential oil price recovery.”

Wall Street analysts are cautiously optimistic on the stock. The Moderate Buy consensus breaks down into 9 Buy analyst ratings versus 5 Hold ratings and 1 Sell rating. The $101.15 average analyst price target indicates 15% upside potential from current levels over the next 12 months. (See Chevron stock analysis on TipRanks).

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