Summary
- On December 10, 2019, the San Ramon California-based Chevron Corp. announced that its organic CapEx program for 2020 would be $20 billion, unchanged from 2019.
- Chevron Corp is throwing in the towel on the Appalachian gas assets in favor of the Permian. The company announces an impairment of between $10 billion to $11 billion in 4Q'19.
- CVX may experience some weaknesses in early 2020, and I recommend selling one-third of your position on any uptick above $118.50. A sudden drop to under $112 is possible next year.
Image: Chevron Big Foot in the Gulf of Mexico. Courtesy: gCaptain.
Investment Thesis
Chevron Corp. (CVX) is one of my seven preferred oil supermajors fully tailored to be part of your long-term holdings of top oil dividend stocks. The group includes Exxon Mobil (XOM), BP plc (BP), Royal Dutch Shell (RDS.A) (RDS.B), Total S.A. (TOT) and Equinor (EQNR). I have included ConocoPhillips (NYSE: COP) in the list as well, even though it is not an oil supermajor since it spun off Phillips 66 (PSX). Still, I consider COP as an equal when it comes to solidity and diversity.
Oil supermajors present what most investors and traders require as a prerequisite for a long-term investment — cyclicality, volatility, and above all resilience, all-in-one package with an above-average dividend.
The investment thesis is quite simple with CVX. I recommend CVX as a long-term investment. However, as you know, the oil market is very volatile and unpredictable. Consequently, I recommend adopting a dual strategy where you keep untouched about 70% of your position and use 30% to trade short term the volatility.
I have indicated in the chart below the market capitalization as of 12/15/2019 and the dividend yield of the seven companies mentioned above:
Chevron is paying a dividend yield of 4.04%, which is quite low compared to its peers. Chevron is one of the biggest oil and gas producers amongst its peers.
The U.S. upstream reached a record 934k Boep/d, or 30.8% of the total output. Another record production led by the Permian reaching 455K Boep/d.
Chevron announced on December 10, 2019, the CapEx budget for 2020.
On December 10, 2019, the San Ramon California-based Chevron Corp. announced that its organic capital and exploratory spending program for 2020 would be $20 billion, which is the same amount that the company approximately spent since 2017.
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