U.S. energy behemoth Chevron Corp. (CVX) announced the discovery of a new offshore natural gas site (Orthrus-2) in Western Australia’s Carnarvon Basin. The discovery – the tenth by Chevron off the Australian coast during the last 18 months – builds on the integrated oil and gas giant’s leading position in this hydrocarbon-rich area.
Drilled to a total depth of 14,098 feet (4,297 meters), the Orthrus-2 well encountered 243 feet (74 meters) of net gas pay. The find is situated in the WA-24-R permit area, approximately 60 miles (100 kilometers) northwest of Barrow Island. Chevron Australia has a 50% operated interest in the prospect, with the other partners being subsidiaries of ExxonMobil Corp. (XOM), Royal Dutch Shell PLC (RDS.A) and BP plc (BP).
We believe that the latest exploration success will boost Chevron’s growth prospects in Australia by adding to its already significant gas interests in the country (through majority holdings in the Gorgon and Wheatstone natural gas developments).
In particular, the drilling success at the Orthrus-2 exploration well is expected to support an expansion of the Chevron-operated A$43 billion ($37 billion) Gorgon liquefied natural gas (LNG) project, biggest of the company’s proposed ventures in Australia.
The Gorgon gas fields, off the coast of Western Australia, are estimated to contain 40 trillion cubic feet of gas deposits with an expected economic life of at least 40 years from the time of start-up. Chevron has said that the venture will have an annual capacity to produce 15 million tons of LNG, with the first shipment expected in 2014.
San Ramon, California-based Chevron is the second-largest U.S. oil company by market value after ExxonMobil. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term “Neutral recommendation on the stock.
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