US President Joe Biden (D-Delaware) could boost Chevron (CVX) by resolving a conflict with Venezuela’s government.
Biden administration officials are in talks with Venezuelan President Nicolás Maduro for an oil deal, The Wall Street Journal claims. Officials hope to ease US sanctions on Venezuela if Maduro agrees to hold “free and fair elections” in 2024.
Chevron Corporation (NYSE: CVX) could benefit from the deal because it has significant capital investments in Venezuela. Those investments include five onshore and offshore production projects, four joint venture projects with Petróleos de Venezuela, S.A (PDVSA), Venezuela’s national oil company, and three heavy or extra-heavy crude projects.
How much oil can Chevron pump in Venezuela?
Chevron’s joint ventures with PDVSA produced 200,000 barrels of oil per day (bpd) before sanctions cut output, Reuters claims. Venezuela produced around 755,000 bpd in February 2022 down from 2.3 million bpd in 2016, Reuters estimates.
Moreover, Chevron wants to trade Venezuelan oil if Biden relaxes sanctions on Maduro’s government, Reuters claims. Reuters reports Chevron is assembling a trading team to market Venezuelan oil. Chevron also has plans to expand the joint ventures with PDVSA.
Additionally, Chevron (CVX) is seeking Venezuelan visas so its employees can travel to the country if the US Treasury Department eases restrictions. The Treasury restricts trade with Venezuela because of the 2019 Venezuelan Presidential Crisis. In particular, the US government has recognized Maduro’s rival Juan Guaidó as the winner of a contested 2018 presidential election.
How Probable is a Venezuela Oil Deal?
It could take some time to restore Venezuelan oil production. The oil fields and equipment are deteriorating because of the US sanctions. However, high oil prices, which have become a political issue in the United States, give Biden a powerful incentive to restore Venezuelan oil imports before the 2024 presidential election.
The average US retail gas price rose from $3.36 a gallon on 11 October 2021 to $3.909 on 3 October 2022, yCharts estimates. US Gas prices hit a high of $5.107 a gallon on 13 June 2022.
Hence, Chevron could make more money soon because it could soon have more oil to pump. However, politics could derail the agreement with Maduro. Notably, Donald J. Trump Senior (R-Florida), the probable 2024 Republican presidential candidate, is hostile to Maduro. Other Republicans who could control both Houses of Congress in January 2023 are also hostile to Maduro.
Is Chevron (CVX) Making Money?
Chevron (CVX) is making money. It reported a quarterly gross profit of $27.196 billion and a quarterly operating income of $16.003 billion on 30 June 2022.
Furthermore, Chevron is a growing company. The quarterly operating income grew from $4.422 billion on 30 June 2021 and the quarterly gross profit grew from $15.402 billion on 30 June 2021.
Stockrow estimates Chevron’s revenues grew by an incredible 82.89% in the quarter ending on 30 June 2022. However, Chevron’s revenues grew by an astounding 178.62% in the quarter ending on 30 June 2021. Consequently, Chevron’s quarterly revenues grew from $37.597 billion on 30 June 2021 to $68.762 billion on 30 June 2022.
How Much Cash is Chevron Generating?
Chevron (NYSE: CVX) can generate enormous amounts of cash. It reported a quarterly operating cash flow of $13.782 billion on 30 June 2022. The quarterly operating cash flow grew from $6.954 billion on 30 June 2021.
In contrast, Chevron reported a quarterly ending cash flow of $12.806 billion on 31 March 2022 that fell to $550 million on 30 June 2022. However, Chevron pays enormous amounts of debt. It reported a quarterly financing cash flow of -$8.138 billion on 30 June 2022. The quarterly ending cash flow rose from $1.572 billion on 30 June 2021.
Impressively, Chevron’s total debt fell from $43.018 billion on 30 June 2021 to $26.235 billion on 30 June 2022. Thus, Chevron finished the past year with far less debt.
Chevron also has more cash. Its cash and short-term investments grew from $7.561 billion on 30 June 2021 to $12.37 billion on 30 June 2022. Thus, Chevron is a cash-rich company that pays its debts.
What Value Does Chevron Have?
I think Chevron (CVX) offers enormous value without Venezuelan production. For example, Chevron had $257.936 billion in total assets on 30 June 2022. The total assets grew from $242.806 billion on 30 June 2021.
Chevron claims to have produced 3.1 million barrels of oil a day in 2021. Additionally, Chevron claims it had oil reserves of 11.2 billion barrels in 2021.
Consequently, I think Mr. Market priced Chevron shares fairly at $157.14 on 10 October 2022. Chevron’s share price is growing, it rose from $108.50 on 8 October 2022. If you want a cash-rich growth stock with growing value, I think Chevron is worth a look.
Furthermore, Chevron is a terrific dividend stock. They have scheduled eight $1.42 Chevron dividends between 9 December 2022 and 10 September 2022. Overall, Chevron shares offered a $5.68 forward dividend and a 3.61% forward dividend yield on 10 October 2022.
If you can accept the morality of big oil, promoting Climate Change, and dealing with oppressive regimes. I think Chevron is an interesting value investment. Those who cannot live with big oil’s morality need to avoid Chevron.
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