uploads///Chevron stock

Could Chevron Stock Soon Look Like a ‘Buy’?


Nov. 14 2019, Published 7:41 a.m. ET

Chevron (CVX) stock has been rising since the company’s third-quarter earnings release on November 1. Month-to-date, CVX stock has increased by 5.3%. Integrated energy peers have also risen, though not as much as CVX. ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and BP (BP) have increased by 1.8%, 4.0%, and 3.4%, respectively.

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Why is Chevron stock rising?

While Chevron’s reported earnings missed analysts’ estimate in the third quarter, its adjusted earnings surpassed their forecast. Its stock fell early on the day of the earnings release, but later recovered. To learn more, read Chevron’s Lower Earnings Disappoint Wall Street.

Whereas the company’s upstream and downstream earnings fell due to lower oil and gas prices and weaker refining margins, its upstream output and domestic refining throughput rose. The company used its operational scale to mitigate adverse business conditions.

Now, in the fourth quarter, oil prices are rising. WTI prices have increased by 6.0% month-to-date and 6.2% quarter-to-date. Therefore, Chevron’s upstream earnings could rise with higher output. In the third quarter, Chevron’s production rose by 2.6% to 3.03 million barrels of oil equivalent per day.

Additionally, equity markets have been surging on better corporate earnings and easing US-China trade tensions. The S&P 500 (SPY) has risen 1.9% month-to-date.

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Chevron’s moving averages

Chevron stock’s 50- and 200-day moving averages have risen 0.6% and 0.3% this month, meaning the gap between the averages has narrowed to 1.5% from 1.9% on November 1. That marginal gap implies Chevron stock is approaching a “bullish” zone. If CVX’s 50-day moving average crosses over its 200-day average, it would enter technically positive territory.

Could Chevron stock enter the “buy” zone?

Everything seems to be going in Chevron’s favor. External factors such as oil prices and equity markets are rising, and the company is building on its internal strengths. Though the company’s hydrocarbon output grew more slowly in the third quarter, its volumes were still close to the record highs it’s seen in the past couple of quarters. Its upstream growth seems intact.

Chevron’s upstream portfolio is strengthening, with its key positions ramping up. While the company’s Australia, Gorgon, and Wheatstone assets have been expanding, its Permian Basin output has been rising. Its Big Foot and Hebron projects’ contribution has also been increasing.

Chevron expects growth in its Permian, Hebron, and shale and tight assets to boost its volumes. It expects 4%–7% production growth in 2019. In this year’s first nine months, the company’s hydrocarbon output rose 6% year-over-year.

If oil prices continue to rise, the company’s upstream earnings could get a substantial boost in the fourth quarter. The prospects of better earnings could even push its stock into the much-awaited “buy” zone.


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