Chevron’s biggest opportunity is in its overseas markets. It’s not a big secret that China, India, and much of Southeast Asia represents an area of independent growth that could push higher without the help of U.S. or Western European demand. This is of particular interest to Chevron which is Australia’s largest natural gas asset holder, with 21 known finds off the coast of Australia since mid-2009 which have added roughly 10 trillion cubic feet in reserves. With its proximity to these rapidly growing markets, and natural gas prices commanding a premium overseas that they do not domestically, Chevron looks poised to profit from high growth in this region.
But, we can’t forget that Chevron Corporation (NYSE:CVX) is a domestic juggernaut as well. As Chesapeake Energy was putting the “for sale” signs in its front yard, Chevron and Royal Dutch Shell plc (ADR) (NYSE:RDS.A) were chomping at the bit to gobble up those assets. Chevron and Royal Dutch Shell wound up purchasing Chesapeake’s Permian Basin assets for a sum of $3.3 billion in September. This is important because the Permian Basin is known for its liquids-rich assets – translating to higher margins since oil prices are often less volatile than natural gas prices – and it’s close enough to Louisiana’s terminals that bypassing Cushing, Okla., and shipping by rail to obtain the higher Brent crude price makes sense.
It would also be completely foolish of me not to mention Chevron’s onshore natural gas assets which could turn into a big moneymaker if President Obama follows through with policies designed to make America more energy independent.
Perhaps the greatest aspect of Chevron, and the reason why I prefer it over peer Exxon Mobil Corporation (NYSE:XOM), is the company’s emphasis on its shareholders. Chevron repurchased $1.25 billion worth of its shares in just the past quarter and has a 25-year streak of boosting its dividend.
Source: Nasdaq.com; * denotes an assumed payout of $1.00 per quarter for remainder of 2013.
In its most recent quarter it announced an 11% dividend increase, which would pushe its yield up to 3.4%, significantly higher than Exxon Mobil Corporation (NYSE:XOM)’s 2.8%. Simply put, there is no smarter play on energy assets than Chevron.
Stay tuned next week, when I’ll unveil the sixth selection to the Basic Needs Portfolio.
The article Basic Needs Portfolio Selection: Chevron originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Intel, MasterCard, and Waste Management and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. The Motley Fools also recommends Chevron, Intel, MasterCard, and Waste Management.
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