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Chevron’s LNG Project Comes Online, Achieves New Milestone

Zacks

Energy behemoth Chevron Corporation CVX recently commenced production at its Wheatstone LNG project in Western Australia. This is a major milestone for the company as the first cargo is on track to set sail in the coming weeks.

While Chevron is the chief operator of the Wheatstone project owning a 64.14% stake, the remaining interests are held by Kuwait Foreign Petroleum Exploration Company, Woodside Petroleum Limited, PE Wheatstone Pty Ltd and Kyushu Electric Power Company.

The project is located 7.5 miles west of Onslow and is to process gas from Wheatstone and Iago fields, both of which are operated by Chevron. The company holds an 80.2 % interest in the offshore licenses containing the Wheatstone and Iago fields. The Wheatstone fields are estimated to contain over 4.5 trillion cubic feet of gas deposits.

The Wheatstone project consists of two liquefaction trains with a shipment capacity of 8.9 million metric tons per year of LNG. While the first liquefaction train has already started production, the second one is expected to become operational in another six months. The project provides Chevron and its partners an opportunity to serve the fast-growing economies of China and India along with other Asian countries.


Chevron’s another mega Australian LNG project — Gorgon — also initiated operations last year which has a shipment capacity of 15.6 million metric tons per year. With these major projects starting production, Chevron expects an improvement in free cash flow. The projects are expected to drive long-term growth and boost shareholders’ value in the coming years. By 2020, Chevron aims to become a major LNG supplier.

With a plethora of new LNG projects underway in Australia, the country is also expected to overtake Qatar which is currently the world’s highest LNG seller. Australia displaced Qatar as the leading gas supplier to Japan in 2013. Further, Australia took the second spot as the world’s leading LNG exporter in 2015 and is expected to scale to the top in 2020.The annual LNG export in Australia is expected to reach 74 million tons by June 2019. This will mainly be driven by a number of mega projects including Chevron’s Wheatstone, Royal Dutch Shell plc’s RDS.A Prelude floating LNG facility, Inpex Corporation’s Ichthys LNG, among others.

Zacks Rank and Key Picks

Chevron is one of the largest publicly traded oil and gas companies in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses. Over a year, shares of Chevron have rallied 12.6% compared with roughly 4.7% gain recorded by the industry. The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are TransCanada Corporation TRP and Crescent Point Energy Corporation CPG. Both companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada Corporation reported average positive earnings surprise of 4.06% in the trailing four quarters.

Crescent Point Energy delivered positive earnings surprise in each of the trailing four quarters, the average being 392.06%.

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